THE  FUNDING  BILL. 


SPEECH 


OF  OHIO, 


DELIVERED 


IN  THE  SENATE  OF  THE  UNITED  STATES 


FEBRUARY  27,.  1868. 


WASHINGTON: 

F.  &  J.  RIVES  &  GEO.  A.  BAILEY, 

IMPORTERS  AND  PRINTERS  OP  THE  DERATES  OP  CONGRESS. 

1868. 


* 

THE  FUNDING  BILL. 


The  Senate  having  under  consideration  the  bill 
<S.  No,  207)  for  funding  the  national  debt  and  for  the 
oonversion  of  the  notes  of  the  United  States— 

Mr.  SHERMAN  said: 

Mr.  President  :  The  attention  of  the  Senate 
lias  been  so  long  occupied  with  grave  political 
questions  deeply  exciting  the  public  mind  that 
1  have  no  doubt  it  will  appear  a  dull  change  in 
our  debate  to  turn  to  questions  purely  of  a 
financial  and  economic  character  ;  yet,  as  our 
constituents  are  laboring  under  the  burdens  of 
taxation  and  the  acknowledged  evils  of  a  depre¬ 
ciated  currency  and  demand  relief  from  us,  it 
becomes  the  imperative  duty  of  Congress  to 
give  attention  to  this  subject.  The  House  of 
Representatives  is  now  engaged  in  the  perform¬ 
ance  of  its  constitutional  duty  of  diminishing 
taxes  ;  and  your  Committee  on  Finance  deem 
it  their  duty  to  lessen,  if  possible,  the  burdens 
of  the  public  debt  and  to  give  increased  value 
to  the  United  States  notes,  now  made  the 
compulsory  basis  of  your  circulation.  We  have, 
therefore,  reported  this  bill  after  careful  con¬ 
sideration.  In  advocating  it  I  do  not  appeal 
to  any  political  bias ;  I  do  not  appeal  to  any 
sectional  interest ;  nor  have  I  any  pride  of 
opinion ;  and  I  shall  only  appeal  to  those  con¬ 
siderations  which  actuate  us  all  alike,  the  desire 
to  relieve  our  people  from  all  the  burdens  of 
taxation  consistent  with  the  public  faith. 

The  Committee  on  Finance  acknowledge  that 
it  is  the  first  and  highest  duty  of  a  Government 
to  maintain  inviolate  the  public  credit.  A 
strict  compliance  with  public  engagements  is 
the  first  duty  of  every  legislative  body.  Public 
credit  is  the  highest  property  of  a  nation,  its 
sure  reliance  in  time  of  danger  and  war  ;  it  is 
a  more  valuable  property  than  any  other,  and 
is  not  to  be  tarnished  or  soiled  by  any  consid¬ 
eration  whatever.  But,  subordinate  to  this 
great  principle,  it  is  our  duty  as  legislators  to 
relieve  our  constituents  from  every  exaction  not 
demanded  by  the  national  safety  or  the  public 
interests.  We  have  a  right  to  take  from  our 
people  their  money  to  the  extent  necessary  to 
carry  on  the  ordinary  expenses  of  the  Govern¬ 
ment  and  maintain  the  public  faith,  but  notone 
cent  further.  The  great  mass  of  mankind'  have 
nothing  to  protect  except  the  reward  of  their 
daily  labor.  This  is  their  only  capital.  In 
every  community — and  ours  is  more  favored  1 


than  most  in  this  particular — the  majority  of 
men  depend  only  upon  their  daily  labor  and 
enjoy  nothing  of  the  blessings  of  civil  govern¬ 
ment  except  in  the  protection  of  the  result  of 
their  labor.  It  is,  therefore,  our  duty  to  take 
not  one  cent  from  them  unless  it  is  demanded 
by  the  public  exigencies. 

It  is  with  this  view,  and  actuated  by  this 
principle,  that  the  Committee  on  Finance  have 
endeavored  to  make  this  bill  a  bill  of  relief, 
reducing,  if  possible,  consistent  with  the  public 
faith,  the  interest  of  the  public  debt,  and  giv¬ 
ing  increased  value  to  United  States  notes. 
We  have  endeavored  in  this  bill  to  accomplish 
three  results:  first,  to  reduce  the  rate  of  in¬ 
terest  with  the  voluntary  consent  of  the  hold¬ 
ers  of  our  securities*  second,  to  make  a  dis¬ 
tinct  provision  for  the  payment  of  the  public 
debt;  and  third,  to  give  increased  value  to 
United  States  notes,  and  to  provide  for  a  grad¬ 
ual  resumption  of  specie  payments.  All  these 
are  objects  admitted  to  be  of  the  highest  im¬ 
portance.  The  only  question  is,  whether  the 
measure  proposed  tends  to  accomplish  them. 

PRESENT  CONDITION  OF  THE  PUBLIC  DEBT. 

The  body  of  our  public  debt  consists  mainly 
in  the  form  of  securities  commonly  known  as 
the  five-twenty  bonds.  Nearly  all  of  the  debt 
of  the  United  States  is  either  reduced  already 
to  that  form  of  security,  or  is  reducible  within 
a  very  short  period  of  time.  I  have  prepared 
a  statement  from  the  official  documents  show¬ 
ing  the  amount  and  time  of  maturity  of  the  five- 
twenty  bonds.  There  are  of  the  first  issue, 
which  became  redeemable  on  the  30th  of  April, 
1867,  now  outstanding  $514,780,500.  Of  the 
second  issue  there  will  be  redeemable  on  the 
31st  of  October  of  next  year  $129,443,800; 
there  will  be  redeemable  ou  the  30th  of  June, 
1870,  $301,880,250,  and  on  the  31st  of  Octo¬ 
ber,  1870,  $181,427,250.  There  are  of  the 
seven-thirties,  which  have  either  been  funded 
into  five-twenties  or  are  in  process  of  being 
funded,  something  over  $480,000,000,  making 
an  aggregate  of  what  might  now  be  regarded 
as  five-twenty  bonds  of  $1,613,442,650,  of 
which  a  little  over  $200,000,000  is  yet  in  the 
form  of  seven-thirties,  and  will  be  funded  be¬ 
fore  the  1st  day  of  July  next.  In  addition  to 
this,  there  are  of  debts  that  are  now  matured, 
or  which  will  mature  this  summer,  an  aggre- 


4 


gate  amounting  to  $106,042,949,  the  chief  part 
of  which  are  the  compound-interest  notes  and 
the  three  per  cent,  certificates,  making  an 
aggregate  of  $1,719,485,599,  all  of  which  are 
either  redeemable  now  or  become  so  within 
five  years  from  this  period  ;  the  great  body  of 
them,  however,  are  redeemable  within  the  pres¬ 
ent  and  the  next  year. 

REDEMPTION  OP  THIS  DEBT  MUST  NOW'  BE  CONSIDERED. 

The  first  question  that  arises,  Mr.  President, 
is  whether  it  is  wise  now  to  provide  for  the 
redemption  of  these  bonds.  If  we  wTere  at 
liberty  to  choose  we  have  not  the  power  to 
choose.  We  are  compelled  to  consider  this 
question.  It  is  already  made  the  subject  of 
political  disputes.  While  it  is  being  consid¬ 
ered  by  us  in  Congress  it  is  being  considered 
by  the  people,  and  it  is  daily  discussed  all  over 
this  broad  country  as  to  how  and  when  the  live- 
twenties  shall  be  redeemed.  Especially  in  the 
West  this  has  been  made  the  subject  of  polit¬ 
ical  contention.  I  might  show  you  by  the  res¬ 
olutions  of  political  parties,  both  Republican 
and  Democratic,  that  we  cannot  avoid  or  evade 
this  issue.  We  must  meet  it.  I  have  here  the 
resolutions  of  both  political  parties  in  the  State 
of  Indiana,  both  declaring  that  these  bonds 
ought  to  be  paid  in  greenbacks  and  differing 
only  as  to  the  limit  of  greenbacks.  I  have  also 
resolutions  adopted  in  different  parts  of  the 
country.  The  tendency  of  the  Democratic 
party  is  to  drift  into  apolitical  declaration  that 
these  bonds  shall  be  paid  in  greenbacks;  and 
great  masses  of  patriotic  men  all  over  the 
country  of  the  political  faith  to  which  the  ma¬ 
jority  of  the  Senate  belong  have  come  to  the 
same  conclusion.  We  are,  therefore,  com¬ 
pelled  to  consider  this  question.  It  will  be 
made  the  basis  of  every  election  next  fall  in 
nearly  all  the  northwestern  States.  No  man 
can  be  elected  to  Congress  unless  he  commits 
himself  for  or  against  this  proposition.  There¬ 
fore  we  are  not  at  liberty  to  choose  whether 
or  not  we  will  consider  this  question. 

Sir,  it  was  the  first  topic  that  was  introduced 
into  this  session  of  Congress  in  both  Houses. 
My  honorable  friend  from  Vermont,  [Mr. 
Edmunds,]  in  a  very  elaborate  speech,  and 
altogether  the  best  yet  presented  on  his  side 
of  the  case,  introduced  it  on  the  first  or  second 
day  of  the  session.  The  same  subject  was 
presented  in  the  House  of  Representatives  by 

distinguished  Representative  from  the  same 
portion  of  the  country,  taking  the  opposite 
view.  It  is  now  more  discussed  than  any 
other  question  except  the  question  of  recon¬ 
struction.  It  must  be  met  by  us  here,  and  in 
anticipation  of  the  movements  of  political 
parties.  If  other  Senators  have  not,  I  cer¬ 
tainly  have  been  overwhelmed  with  proposi¬ 
tions  of  all  kinds  and  character  from  every 
part  of  the  country,  from  every  State  in  the 
Union,  proposing  various  schemes  of  finance 
affecting  the  very  question  proposed  to  be  dealt 
with  by  this  bill. 

My  own  conviction  was,  that  two  years  ago 
this  question  ought  to  have  been  settled,  and 
the  ground  and  character  and  mode  and  man¬ 
ner  of  redemption  of  these  bonds  ought  then 


to  have  been  settled.  I  addressed  the  Senate 
on  this  subject  on  a  bill  containing  similar 
provisions  to  this,  on  the  22d  of  April,  1866. 
I  will  read  what  I  said  then  : 

“Now,  Mr.  President,  the  only  additional  ques¬ 
tion  I  need  present  in  this  connection  is:  is  this  the 
time  to  fund  the  public  debt?  I  say  emphatically  it 
is.  I  beiieve  we  have  wasted  four  or  live  precious 
months  in  doing  it.  I  believe  that  the  process  would 
have  been  easier  at  the  beginning  of  this  session  than 
it  will  be  now;  and  why?  In  order  to  fund  the  pub¬ 
lic  debt  of  the  United  States  a  large  amount  of  cur¬ 
rency  is  necessary;  but  it  is  necessary  for  us  to  reduce 
our  currency  as  soon  as  possible.  We  cannot  get 
back  to  specie  payments  without  some  reduction  of 
the  currency.  Every  one  desires  to  resume  specie 
payments.  Before  we  return  to  specie  payments 
this  debt  ought  to  be  funded.  It  cannot  be  funded 
on  as  favorable  terms  after  we  return  to  specie  pay¬ 
ments.  The  very  abundance  of  the  currency  obvi¬ 
ously  enables  us  to  fund  the  debt  at  a  low  rate  of 
interest;  and  it  is  just  and  right,  as  this  debt  was 
contracted  upon  an  inflated  currency,  that  upon  that 
same  currency  the  debt  ought  to  be  funded  in  its 
permanent  form.” 

THE  POLICY  OF  CONTRACTION. 

Mr.  President,  I  believe  that  most  reflecting 
men  will  now  admit  that  if  two  years  ago  we 
had  adopted  some  provision,  comprehensive  in 
its  character,  to  fund  the  public  debt  and  to 
provide  for  the  redemption  of  the  five-twenty 
bonds  when  they  became  redeemable,  it  would 
have  been  wiser.  At  that  time  no  portion  of 
them  were  redeemable.  The  first  became  re¬ 
deemable  about  one  year  ago;  but  the  whole 
country  was  then  filled  with  the  idea  of  Mr. 
McCulloch,  that  the  only  safety  was  in  con¬ 
traction,  to  get  back  to  specie  payments  before 
anything  was  done  with  the  public  debt;  and 
the  policy  was  adopted  of  authorizing  a  con¬ 
traction  of  the  currency  without  any  regard  to 
funding  whatever.  That  policy  was  entered 
into;  and  by  the  act  of  April  12,  186G,  passed 
against  my  earnest  protest,  we  gave  to  the  Sec¬ 
retary  of  the  Treasury  almost  unlimited  power 
over  the  currency  and  over  the  public  debt. 
We  authorized  him  to  convert  every  form  of 
indebtedness  into  any  form  of  indebtedness 
provided  for  by  previous  acts.  There  was  no 
other  limitation  upon  his  power  over  the  public 
debt  or  the  currency  except  that  he  could  only 
reduce  the  greenback  currency  at  the  rate  of 
$4,000,000  per  month.  In  every  other?  respect 
he  had  the  most  unlimited  power.  I  have  no 
doubt  that  he  exercised  his  power  conscien¬ 
tiously  ;  I  have  never  thought  otherwise ; 
but  what  has  been  the  result?  Within  two 
years  he  contracted  the  legal- tender  currency 
$160,000,000,  and  the  plain  United  States  notes 
over  forty  million  dollars.  He  also  converted 
all  the  floating-currency  debt  into  gold-interest 
bonds.  At  the  time  this  law  was  passed,  April 
12,  1866,  the  total  amount  of  five-twenty  bonds 
was  $666,000,000,  and  the  great  mass  of  the 
debt  wasin  what  are  called  currency  obligations, 
the  principal  of  which,  undoubtedly,  could 
have  been  paid  in  currency.  But  conscien¬ 
tiously  believing,  as  he  did,  that  the  best  way 
to  the  resumption  of  specie  payments  was  by  a 
rapid,  and  steady  contraction  of  the  currency, 
he  entered  upon  the  policy  I  have  stated. 

Now,  what  has  been  the  result?  Why,  sir, 
in  April,  1866,  the  price  of  gold  was  125.  It 
had  steadily  declined  from  the  close  of  the  war 


o 


until  it  had  reached  its  lowest  point,  I  believe, 
in  April,  1866,  the  very  time  of  the  passage  of 
this  law.  What  was  the  result?  I  do  not  at¬ 
tribute  it  all  to  that  measure  ;  but  what  was  the 
result?  From  that  time  to  this  gold  has  ad¬ 
vanced,  varying  between  130  and  140,  and  has 
never  from  that  day  to  this  reached  the  price 
at  which  it  stood  at  the  passage  of  the  act ;  and 
are  we  any  nearer  specie  payments  now  than 
we  were  then?  Not  at  all.  We  have  con¬ 
verted  our  debt  into  a  more  oppressive  form 
of  obligation.  The  interest  of  the  great  mass 
of  it  is  now  payable  in  gold  at  the  high  rate 
of  six  per  cent.,  and  the  bonds  are  less  valu¬ 
able  in  gold  than  then.  I  still  think  that  if 
we  had  looked  rather  to  the  funding  of  the 
debt  with  the  currency  then  afloat  we  could 
have  passed  the  whole  of  it  into  a  five  per 
cent,  instead  of  into  a  six  per  cent.  loan.  The 
state  of  the  money  market  from  that  day  to 
this  justifies  the  assertion  that  the  whole  of  this 
maturing  and  redeemable  debt  might  have  been 
converted  at  par  into  a  five  per  cent,  ten-forty 
bond.  If  the  bill  I  refer  to  had  passed  two  years 
ago  a  great  part  of  our  debt  would  have  gone 
into  the  five  per  cent,  loan  provided  for  by  it,  and 
the  country  would  have  been  saved  many  mill  ions 
of  gold  per  annum,  and  would  have  escaped  the 
dangerous  question  now  presented  to  us. 


HOW  FIVE-TWENTIES  ARE  REDEEMABLE. 

Now,  the  question  arises,  how  may  these  five- 
twenty  bonds  be  redeemed?  Four  different 
modes  have  been  suggested,  in  regard  to  each 
of  which  I  intend  to  make  a  few  observations  : 

First.  That  these  bonds  may  be  paid,  the 
principal  in  gold,  at  any  time  after  five  years. 

Second.  That  these  bonds  may  be  paid  by  a 
new  issue  of  legal  tenders  similar  in  character 
to  the  kind  issued  when  they  were  sold. 

Third.  That  either  by  selling  a  new  bond  or 
by  levying  taxes  we  may  draw  into  the  Treas¬ 
ury  existing  United  States  notes,  and  with  those 
pay  off  or  redeem  the  five-twenties. 

Fourth.  The  plan  suggested  by  the  commit¬ 
tee  of  giving  to  the  holder  of  the  bond  at  his 
option  the  right  to  take  another  bond  bearing 
a  less  rate  of  interest. 

Mr.  President,  let  me  briefly  present  the 
view  taken  of  these  different  propositions.  Is 
the  United  States  bound  in  law  or  equity  to 
postpone  the  redemption  of  the  five-twenties 
until  they  rise  to  par  in  gold?  My  friend  from 
Vermont  discussed  this  question  with  great 
ability,  and  he  affirmed  that  we  were  so  bound ; 
that  we  had  no  right  to  redeem  these  bonds 
until  the  bonds  rose  to  par  in  gold.  That  is 
his  position,  and  he  maintained  it  with  great 
force. 


FIVE -TWENTY  BONDS— THE  RIGHT  TO  REDEEM  THEM. 

Let  us  now  consider  the  legal  meaning  of  the 
contract  between  the  United  States  and  the 
holders  of  the  live-twenty  bonds. 

Mr.  President,  this  form  of  debt  contains 
one  feature  that  was  considered  its  chief  virtue, 
and  that  is  the  right  of  redemption  after  five 
years.  We  all  remember  the  time  when  this  j 
first  five-twenty  loan  was  introduced.  Up  to  i 
that  moment  the  bonds  that  had  been  sold  were  j 
long  bonds,  payable  twenty  years  after  their 
date,  now  called  the  bonds  of  ’81 ;  but  in  Febru¬ 
ary,  1862,  Congress,  for  the  first  time,  upon  the  j 
recommendation  of  the  then  Secretary  ot  the  j 
Treasury,  introduced  the  idea  of  retaining  the  j 
right  to  redeem  thebondsafterfiveyears.  That  j 
provision  was  inserted  in  the  act  of  February  j 
25,  1862,  by  which  after  five  years  the  United  j 
States  had  the  right  to  redeem  the  principal  of 
the  bonds  upon  paying  the  amount  of  them. 
The  right  of  redemption  was  considered  the 
most  favorable  feature  of  that  loan.  The  Sec¬ 
retary  of  the  Treasury,  in  his  report  to  Con¬ 
gress,  said  it  was  important  to  always  retain 
the  right  to  redeem  the  principal  debt  with  a 
view  at  any  time  to  take  advantage  of  the  j 
money  market  and  reduce  the  rate  ot  interest ; 
and  he  proposed,  and  upon  his  recommenda¬ 
tion  Congress  concurred  in  the  idea,  that  in 
future  loans  a  short  time  should  be  fixed  after  h 
which  the  debt  might  be  redeemed,  while  a 
longer  time  was  fixed  within  which  the  debt  ;j 
must  be  paid.  This  was  a  valuable  privilege  jj 
reserved  by  the  United  States  for  a  valuable  i; 
purpose.  We  were  then  engaged  in  war,  and  ; 
by  the  experience  of  nations  it  was  known  that  ; 
during  war  we  must  submit  to  hard  and  exact-  jj 
ing  terms  in  order  to  borrow'  money;  but  the  j! 
right  to  get  better  terms  was  reserved  at  the  jl 
end  of  five  years.  1- 


.  AS  TO  OLD  BONDS  ISSUED  PRIOR  TO  1862. 

Now,  I  confess  that  this  would  undoubtedly 
be  the  rule  as  to  all  the  old  bonds  issued  before 
the  act  of  February  25, 1862;  and  why?  Because 
those  bonds  were  issued  when  no  one  could 
have  contemplated  any  other  mode  of  payment 
except  in  gold;  and  therefore  the  Secretary 
of  the  Treasury  has  always  decided,  and  prop¬ 
erly  decided,  that  bonds  issued  before  the  legal- 
tender  act  took  effect  must  be  paid  in  gold  to 
the  last  dollar;  and  why?  The  bonds  issued 
in  1861,  the  bonds  issued  many  years  ago,  were 
all  issued  when  no  one  contemplated  any  other 
mode  of  payment,  when  there  was  no  other 
money  in  which  to  pay  except  gold  and  silver 
coin  ;  and  as  a  matter  of  course  these  old  bonds 
must  be  paid  in  that  way.  This  question  was 
first  presented  to  Secretary  Chase  and  decided 
by  him  when  a  portion  of  the  Texas  loan  ma¬ 
tured  in  the  fall  of  1862.  A  small  portion  of 
that  debt  matured,  and  he  paid  it  in  gold  be 
cause  it  had  been  issued  at  an  old  date.  His 
decision,  to  which  I  shall  have  occasion  to  refer 
in  discussing  another  point  of  this  subject,  wras 
not  based  at  all  upon  the  question  of  legal 
tender;  it  did  not  raise  the  question ;  but  it 
was  decided  upon  the  ground  that  as  gold  was 
paid  for  those  bonds  gold  must  be  returned  to 
the  bondholder. 

A  Government  may,  as  a  matter  of  para¬ 
mount  authority,  compel  its  citizens  as  between 
each  other  to  receive  and  pay  out  its  notes  as 
money  on  preexisting  contracts;  but  it  cannot 
debase  its  money  to  make  the  payment  of  its 
own  debts  easier.  We  have  no  right  to  debase 
our  coin  so  as  to  make  the  payment  of  our 
debt  easier.  We  may,  if  there  is  no  stipula¬ 
tion  to  the  contrary,  pay  in  that  kind  of  coin 
or  money  which  existed  when  the  debt  was 
created;  but  after  we  have  created  a  debt  and 


6 


after  we  have  received  gold  or  good  money  we 
cannot  then  debase  that  coin  and  pay  it  in  in¬ 
ferior  coin.  That  principle  I  admit.  Although 
we  may  do  it  as  to  contracts  between  individ¬ 
uals,  because  we  have  the  power  over  individ¬ 
uals,  we  have  no  right  to  do  it  as  between 
ourselves  and  public  creditors.  A  nation  in 
dealing  with  a  public  creditor  stands  on  a  dif¬ 
ferent  footing  from  what  it  does  in  transac¬ 
tions  between  individuals  of  that  nation.  We 
may  prescribe  a  rule  as  between  our  own  peo¬ 
ple  ;  but  subsequent  to  a  contract  entered  into 
by  us  as  a  nation  we  have  no  right  to  vary  the 
contract  between  ourselves  as  a  nation  and  our 
public  creditor.  The  only  rule  is  the  contract, 
the  law,  and  we  have  no  right  to  change  that 
without  being  guilty  of  repudiation.  That  is 
the  doctrine.  I  therefore  assume  that  all  the 
old  bonds  issued  before  the  legal-tender  act 
are  payable  in  coin. 

AS  TO  BONDS  ISSUED  UNDER  LEGAL-TENDER  ACT. 

But  the  question  is,  whether  the  bonds  issued 
since  the  legal-tender  act  took  effect  may  be 
paid  in  legal  tenders.  Upon  this  question  I 
may  as  well  state  now,  the  Committee  on  Fi¬ 
nance  do  not  pass  any  opinion,  and  in  the  ob¬ 
servations  I  make  on  this  point  I  speak  for  my¬ 
self,  not  for  them.  They  deem  the  occasion  a 
proper  one  to  offer  an  exchange  to  the  public 
creditor,  leaving  for  the  future  to  settle  the 
result  of  a  refusal.  When  we  look  at  the  law, 
which  is  the  contract,  it  so  happens  that  the 
identical  act  which  provided  for  the  legal  ten¬ 
ders  also  provides  for  the  five-twenty  bonds. 
Every  man  who  boughtabond  bought  it  under 
an  act  which  also  provides  for  the  legal  tenders. 
They  were  contemporaneous.  However,  the 
notes  were  issued  before  the  bonds  were  issued. 
The  notes  were  all  outstanding  before  a  single 
bond  was  issued. 

Mr.  EDMUNDS.  What  was  the  limit  of 
the  legal  tenders  ? 

Mr.  SHERMAN.  I  will  come  to  that  pres¬ 
ently.  Now,  this  legal-tender  clause  provides 
that — 

“Such  notes  herein  authorized  shall  be  receivable 
in  payment  of  all  taxes,  internal  duties,  excises, 
debts,  and  demands  of  every  kind  due  to  the  United 
States,  except  duties  on  imports,  and  of  all  claims 
and  demands  against  the  United  States  of  every 
kind  whatsoever,  except  for  interest  upon  bonds  and 
notes,  which  shall  be  paid  in  coin,  and  shall  also  be 
lawful  money  and  a  legal  tender  in  payment  of  all 
debts,  public  and  private,  within  the  United  States, 
except  duties  on  imports  and  interest  as  aforesaid. ” 

Does  not  this  act,  in  so  many  words,  declare 
that  while  coin  shall  be  paid  for  the  interest 
of  the  public  debt,  yet  the  notes  provided  by 
this  act  shall  be  a  lawful  tender  in  payment  of 
all  public  debts? 

Mr.  EDMUNDS.  Will  my  friend  permit 
me  to  inquire  whether  he  ought  not  to  read 
what  he  has  read  in  connection  with  the  suc¬ 
ceeding  clause,  which  authorizes  the  conver¬ 
sion  of  the  legal  tenders  into  bonds?  Take 
the  whole  statute  together. 

Mr.  SHERMAN.  I  will  come  to  that.  I 
cannot  read  it  all  in  a  minute.  But  here  is 
the  legal- tender  clause  which  I  have  read. 
Now,  I  will  come  to  the  ‘point.  If  this  case 


stood  upon  this  legal-tender  clause  alone,  if 
there  was  no  other  provision  of  law,  would 
the  Senator  from  Vermont  have  any  doubt  of 
the  legal  construction  of  that  clause? 

Mr.  EDMUNDS.  Probably  not;  but  there 
is  another  provision,  and  I  think  my  friend 
will  agree  that  we  are  bound  to  look  at  the 
whole  of  the  statute  in  order  to  get  at  the 
meaning  of  any  of  its*  parts,  to  construe  it 
altogether. 

Mr.  SHERMAN.  My  friend  has  already 
stated  all  I  expected  him  to  state.  He  admits 
that  if  the  matter  stood  on  the  legal-tender 
clause  there  would  be  no  doubt,  there  could 
be  no  resisting  the  conclusion,  that  the  legal 
contract  between  the  Government  and  bond¬ 
holder  was  that  the  interest  should  be  paid 
in  coin  and  the  principal  should  be  paid  in 
the  kind  of  legal  tenders  specified  by  this 
act.  That  is  the  point  he  wdshes  to  make,  and 
I  agree  that  if  these  bonds  were  issued  under 
this  act  and  under  the  restrictions  contained 
in  it,  namely,  that  the  legal  tenders  were  con¬ 
fined  to  $150,000,000,  with  the  right  to  con¬ 
vert  them  into  bonds,  then  his  argument  would 
be  irresistible ;  but  the  misfortune  of  his  argu¬ 
ment  is,  that  these  restrictions  were  repealed 
before  the  bonds  were  issued,  but  I  anticipate 
the  argument  and  wish  again  to  refer  to  the 
act  of  February  25,  1862.  This  act  further 
provides  that  the  amount  of  legal  tenders  shall 
be  limited  to  $150,000,000.  It  also  provides 
that  the  holder  of  these  legal  tenders  may  at 
any  time  convert  them  into  five-twenty  bonds, 
the  very  bonds  we  are  now  discussing;  and 
the  second  section  goes  on  and  provides  for 
the  issue  of  those  bonds.  If  those  bonds  had 
been  issued  and  negotiated  solely  under  the 
act  of  February  25,  1862,  it  would  have  been 
irresistible  logic  that  it  was  not  contemplated 
that  the  $500,000,000  authorized  by  this  act 
should  be  paid  with  $150,000,000  legal  tenders, 
themselves  convertible  into  bonds.  But  here 
is  the  weakness  of  the  argument,  in  my  opinion, 
of  my  friend  from  Vermont:  no  bonds  were 
issued  under  that  act. 

Every  one  of  these  restrictions  was  removed 
and  repealed  before  these  bonds  were  nego¬ 
tiated.  In  July  following,  before  a  single 
bond  was  sold,  the  limitation  as  to  the  amount 
was  increased  to  $800,000,000.  In  December 
following  the  Secretary  had  failed  to  nego¬ 
tiate  the  five-twenty  loan ;  and  in  his  report, 
to  which  I  will  now  refer,  he  says  to  Con¬ 
gress  that  it  is  impossible  for  him,  under  the 
restrictions  contained  in  these  acts,  to  sell 
these  bonds;  that  after  all  his  efforts  he  has 
sold  only  a  few  millions;  that  the  loan  has 
been  a  failure,  and  asks  us  for  additional  legis¬ 
lation.  I  now  ask  attention  to  the  report.  In 
a  previous  part  of  it  he  states  the  failure  to 
negotiate  the  five-twenty  loan,  and  that  he  had 
received  but  a  small  amount,  comparatively, 
from  it.  He  then  says  : 

“The  act  of  last  session’'* — 

The  one  to  which  I  have  already  referred — 

“authorized  the  Secretary  to  issue  bonds  of  the  Uni¬ 
ted  States, already  often  mentioned  as  five-twenties, 
to  the  amount  of  $500,000,000,  and  to  dispose  of  them 


7 


for  coin  or  United  States  notes  at  the  market  value 
thereof.  In  the  same  act  authority  was  given  to  issue 
$150,000,000  in  United  States  notes,  which  authority 
was  afterward  enlarged  to  $250,000,000;  and  it  was 
provided  that  any  holder  of  such  notes  to  the  amount 
of  fifty  dollars,  or  any  multiple  of  fifty,  might  ex¬ 
change  them  for  five-twenty  bonds  at  par. 

“  The  eft’ect  of  these  provisions  was  to  make  nego¬ 
tiations  of  considerable  amounts  impossible;  for  con¬ 
siderable  amounts  are  seldom  taken,  except,  with  a 
view  to  resales  at  a  profit,  and  resales  at  any  profit 
are  impossible  under  the  law.” 

Then  he  goes  on  to  say : 

“The  Secretary  respectfully  recommends  the  re¬ 
peal  of  both  these  provisions.  The  first  imposes,  it 
is  believed,  a  restriction  which  Congress  did  not  in¬ 
tend;  and  the  second  has  been  followed  by  the  incon¬ 
veniences  which  were  feared  rather  than  by  the 
benefits  which  were  expected.” 

Then  he  goes  on  to  say: 

“Should  Congress,  however,  be  of  opinion  that 
these  clauses  should  be  retained,  it  will  be  necessary 
to  provide  for  other  laws,  at  rates  more  favorable  to 
the  takers  than  convertibility  into  five-twenties. 
This  can  be  done  either  by  authorizing  bonds  at 
longer  time  or  by  increasing  the  rates  of  interest 
offered. 

“The  Secretary  cannot  recommend  either  course 
except  as  an  alternative  to  no  provision  at  all.” 

My  friend  from  Maine  [Mr.  Fessenden]  will 
remember  that  when  we  were  called  upon  to 
consider  this  question  we  had  to  choose  be¬ 
tween  three  alternatives:  the  repeal  of  these 
restrictions  which  prevented  the  sale  of  five- 
twenty  bonds,  or  selling  the  bonds  at  a  higher 
rate  of  interest,  or  selling  them  below  par. 
We  all  remember  that.  The  Senator  from 
Maine,  in  reporting  the  bill,  stated  these  alter¬ 
natives.  Finally,  after  long  consideration — 
for  the  subject  was  debated  over  and  over 
again — the  Committee  on  Finance  agreed  upon 
the  act  to  which  I  will  now  refer,  the  act  of 
March  8,  1863.  That  act  repealed  the  limit  as 
to  the  amount  of  circulation  and  raised  it  to 
$450,000,000  ;  and  it  also  took  away  the  right 
to  convert,  which  the  Secretary  said  was  the 
other  restriction  that  prevented  the  sale  of  the 
bonds ;  and  by  an  ingenious  device,  suggested 
by  the  then  Senator  from  Vermont,  [Mr.  Col- 
lamer,]  it  was  proposed  to  limit  to  the  holders 
of  the  outstanding  greenbacks  the  right  tocon- 
vert  them  up  to  the  1st  of  July  then  next ;  but 
if  they  did  not  do  it  by  that  time  the  right  was 
to  cease.  By  this  legislation  in  the  act  of 
March  3, 1863,  the  limitations  which  prevented 
the  sale  of  the  first  five-twenty  bonds  were 
repealed,  and  then,  for  the  first  time,  this  loan 
was  taken.  Then  it  was  that  an  agency  was 
organized  and  means  were  taken  to  spread 
these  bonds  all  over  the  country,  and  they 
were  sold  ;  but  they  were  not  sold  until  these 
restrictions  were  removed,  and  they  were  sold 
upon  a  basis  of  $450,000,000,  without  the  right 
of  redemption,  with  no  privilege  whatever 
except  that  of  being  receivable  in  payment  of 
taxes.  That  was  the  state  of  the  law  upon 
which  the  legal  right  of  the  holders  of  the 
five- twenties  rests.  They  refused  to  buy  these 
bonds  upon  the  terms  of  the  act  of  February 
25,  1862.  They  did  buy  them  under  the  act 
of  March  3,  1863  ;  and  it  is  idle  to  rest  their 
claims  upon  restrictions  repealed  before  their 
bonds  were  issued. 

1  wish  to  read  a  little  further,  to  show  that 


the  Secretary  of  the  Treasury,  Mr.  Chase,  a 
year  afterward,  in  December,  1863,  in  his 
report,  again  stated  that  Congress,  having  re¬ 
lieved  him  from  the  restrictions  of  the  act  of 
1862,  enabled  him  to  sell  the  five-twenty  bonds. 
He  says: 

“On  that  day,  March  3,  1863,  the  act  to  provide 
ways  and  means  for  the  support  of  the  Government 
received  the  approval  of  the  President  and  became 
law.  In  addition  to  various  provisions  for  loans,  it 
contained  clauses  repealing  the  restrictions  affecting 
the  negotiation  of  the  five-twenties,  and  thus  dis¬ 
engaged  that  important  loan  from  the  embarrass¬ 
ments  which  had  previously  rendered  it  almost  una¬ 
vailable.” 

Then  he  goes  on  and  says  that  every  dollar 
of  it  was  sold  in  a  short  time,  presenting  a 
remarkable  case  of  success;  but  it  was  not 
sold,  as  my  friend  from  Vermont  says,  under 
the  act  of  February  25,  1862.  On  the  con¬ 
trary,  there  was  an  utter  failure  to  sell  the  loan 
under  that  act.  It  was  sold  under  the  subse¬ 
quent  law  which  repealed  the  restrictions  of 
the  act  of  1862,  and  it  was  sold  upon  a  basis 
of  currency  amounting  to  $450,000,000,  and 
when  the  notes  had  been  so  depreciated  by  our 
legislation,  purposely,  for  wise  purposes,  when 
the  right  to  fund  was  taken  away,  and  no  right 
was  given  to  these  notes  except  to  be  paid  to 
the  Government  in  the  way  of  taxes. 

AS  TO  REPRESENTATIONS  BY  AGENTS. 

Now,  Mr.  President,  there  is  another  point 
in  the  argument  of  my  friend  from  Vermont 
that  is  much  more  difficult  to  answer.  It  is 
true — and  he  has  collated  the  proof  in  his 
speech  very  well — that  the  various  agents  of 
the  Government  stated  that  these  bonds  would 
be  paid  in  coin,  and  that  creates  the  embar¬ 
rassment  in  regard  to  this  matter  that  has 
always  affected  my  mind  more  than  any  legal 
difficulty  in  the  way ;  because  I  think  the  na¬ 
tion  is  not  only  bound  to  observe  the  law,  but 
it  is  bound  to  pay  a  reasonable  degree  of  respect 
to  the  representations  made  at  the  time  these 
bonds  were  sold.  It  is  true,  as  matter  of  law, 
that  no  agent  could  vary  the  contract  ;  that 
every  man  who  bought  these  bonds  bought 
them  upon  the  face  of  the  law,  and  not  upon 
the  mere  advertisements  of  agents  ;  still  every 
wise  legislator  would  consider  the  extent  of 
those  representations  and  how  far  they  affected 
the  public  mind. 

It  has  been  sometimes  said,  and  my  friend 
from  Vermont  said  that  this  was  done,  and 
Congress  silently  acquiesced.  Congress  never 
acquiesced  in  it.  Congress  was  not  in  session 
when  any  portion  of  this  loan  was  sold.  We 
adjourned  on  the  4th  of  March,  1863,  and  did 
not  convene  here  until  the  December  follow¬ 
ing,  and  within  that  time  all  these  bonds  were 
sold.  The  silence  of  the  subsequent  Congress 
could  not  change  the  contract  which  was  made 
in  March,  1863,  and  has  no  effect  upon  the  case. 

The  first  reference  made  by  the  Senator  from 
Vermont  is  to  the  decision  of  Secretary  Chase 
on  the  payment  of  the  Texas  bonds  in  Decem¬ 
ber,  1862.  The  Senator  in  his  speech  stales 
this  decision  too  strongly.  He  says  that  the 
Secretary  of  the  Treasury  then  decided  that 
1 1  the  legal- tender  clause  did  not  apply  to  Gov- 


8 


ernment  securities.  Now,  I  will  read  the  de¬ 
cision  of  tiie  Secretary.  I  read  from  his  letter 
of  January  5,  18G3,  in  reply  to  a  resolution  of 
the  House  of  Representatives.  He  states  that 
he  concluded  to  pay  this  loan  in  coin  for  these 
reasons: 

“My  judgment  was  determined  in  favor  of  pay¬ 
ment  in  coin,  not  merely  by  the  weighty  considera¬ 
tions  growing  out  of  its  beneficial  influences  on 
public  credit,  but  by  the  circumstance  that  I  found 
myself  able  to  obtain  the  needed  specie  at  a  cost  so 
small  that  payment  in  coin  was,  in  tact,  a  less  incon¬ 
venience  to  the  Treasury  and  a  less  interference  with 
payments  to  and  for  the  Army  and  Navy  than  pay¬ 
ment  in  notes  would  have  been. 

The  only  decision  furnished  by  the  Senator  in 
his  ample  collections  of  the  representations 
made  by  the  officers  of  the  Government  (which 
after  all,  it  seems  to  me,  are  rather  bare)  was 
a  letter  which  he  introduced  signed  by  George 
Harrington,  Assistant  Secretary,  dated  May 
26,  1863,  pending  this  loan,  and  a  letter  of 
Mr.  Field,  also  Assistant  Secretary.  Mr.  Har¬ 
rington  said  in  his  letter: 

“Tho  five-twenty  sixes,  payable  twenty  year?  from 
date,  though  redeemable  after  five  years,  are  consid¬ 
ered  as  belonging  to  the  funded  or  permanent  debt; 
and  so,  also,  are  the  twenty-years’  sixes,  into  which 
the  three-years’ seven-thirty  notes  are  convertible. 
These  bonds,  therefore,  according  to  tho  usage  of  the 
Government,  are  payable  in  coin.” 

The  Senator  also  introduced  a  letter  of  Mr. 
Field  when  he  was  Assistant  Secretary,  the 
only  other  letter  introduced  from  the  Treasury 
Department  before  these  bonds  were  all  nego¬ 
tiated :  and  that  simply  stated  as  a  fact  that 
they  would  be  paid  in  gold.  There  was  no 
reference  to  the  law,  no  decision  upon  the 
terms  of  the  law,  but  a  mere  reference  to  the 
custom  of  the  Department  as  to  old  bonds 
issued  before  the  legal-tender  act,  and  no  doubt 
it  was  made  upon  the  common  expectation 
that  long  before  the  five  years  should  run  out 
specie  payments  would  be  resumed  in  this 
country  ;  and  no  doubt  they  would  have  been^ 
if  our  arms  had  been  victorious  during  that 
summer;  but  certainly  none  of  these  letters 
can  be  regarded  as  a  formal  construction  of  the 
legal-tender  act,  which  is  not  even  referred  to. 

Mr.  President,  I  will  not  follow  this  matter 
further,  because  it  is  not  necessary  for  my 
argument  that  I  should  do  so  ;  but  1  submit  to 
Senators  whether  the  presentation  of  the  law 
and  the  facts  in  regard  to  the  five -twenty  loan 
does  not  at  least  raise  a  reasonable  doubt  upon 
which  honest  men  may  disagree.  All  that  is 
necessary  for  my  argument  is  to  show  that 
a  doubt  does  rest  upon  the  mode  and  manner 
of  paying  these  bonds.  I  am  not  here  to  advo¬ 
cate  either  view  of  the  question,  although  I 
am  willing  to  express  my  own  opinions.  I 
merely  show  you  that  there  is  such  a  doubt 
that  reasonable  and  honorable  men  may  differ 
as  to  whether  or  not  the  Government  of  the 
United  States  may  pay  these  bonds  in  some 
other  way  than  in  coin.  If  so,  that  doubt 
ought  to  be  removed,  or  some  other  bond  sub¬ 
stituted,  and  not  leave  this  question  unsettled 
to  poison  the  public  credit. 

REDUMPTION  IN  NEW  LEGAL-TENDER  NOTES. 

There  is  a  second  mode  proposed  by  parti¬ 
sans  in  w  hich  to  pay  off  the  five-twenty  bonds, 


and  that  is  by  issuing  a  new  batch  of  green¬ 
backs.  This  is  a  plausible  and  a  dangerous 
device.  No  man  can  justify  it.  Why?  Because 
the  very  acts  under  which  these  bonds  were 
issued  contain  limitations  which  we  cannot  and 
dare  not  exceed.  These  limitations  were  put 
in  ever}'  loan  act  and  finally  embodied  in  the 
form  of  a  guarantee  in  the  act  of  June  80, 
1864,  to  which  I  will  now  refer.  The  limita¬ 
tion  contained  in  the  last  preceding  act,  that 
of  March  3,  1863,  in  force  when  the  five- 
twenties  were  negotiated,  was  $450,000,000. 
The  act  of  June  30, 1864,  modified  and  repeated 
this  limitation,  as  follows  : 

“  Nor  shall  tho  total  amount  of  United  States  notes 
issued  or  to  he  issued,  ever  exceed  $400,000,0(X) ;  and 
such  additional  sum,  not  exceeding  $50,000,000,  as 
may  be  temporarily  required  for  the  redemption  of 
temporary  loan.” 

This  limitation  upon  the  amount  of  green* 
backs  was  always  a  part  of  the  loan  laws,  and 
why?  Because  the  amount  of  those  notes  issued 
■would  regulate  and  fix  the  value  of  the  bonds 
themselves.  In  all  the  loan  acts,  therefore,  the 
amount  of  greenbacks  issued  from  time  to 
time  was  limited  by  law,  and  that  limitation 
was  a  part  of  the  contract  under  which  the 
bonds  were  issued,  and  hence  any  proposition 
which  looks  to  an  increase  of  the  legal  tenders 
with  a  view  by  this  increase  to  pay  off  the  five- 
twenties  would  be  a  plain,  palpable  violation 
of  a  public  engagement,  just  as  much  as  would 
be  a  clipping  of  the  coin,  or,  to  follow  the  ex¬ 
ample  of  the  Middle  Ages,  a  debasement  of  the 
coin  with  more  alloy.  Every  additional  green¬ 
back  issued  tends  to  depreciate  the  value  of 
the  security,  and  therefore,  as  the  law  itself 
limits  the  amount,  it  must  be  complied  with, 
whatever  is  the  consequence. 

1  take  it,  then,  that  no  proposition  will  ever 
receive  the  sanction  of  Congress  in  the  face  of 
this  law,  providing  that  the  five-twenties  shall 
be  redeemed  with  any  other  notes  than  those 
in  existence  at  the  time  they  were  sold  ;  that 
any  proposition  of  that  kind  would  be  dishon¬ 
orable  to  the  country  and  dishonorable  to  any 
one  who  should  seriously  propose  and  advo¬ 
cate  it.  It  would  be  to  create  a  depreciated 
currency  in  order  to  evade  the  payment  of  an 
honest  debt. 

But,  sir,  aside  from  that,  as  an  act  of  pub¬ 
lic  policy,  it  would  be  fatal  and  injurious.  It 
would  reopen  the  flood-gates  of  paper  money. 
It  would  impair  all  values;  it  would  unhinge 
all  standards  ;  it  would  affect  all  prices.  None 
would  suffer  from  such  a  debasement  of  the 
currency  so  much  as  the  laboring  man.  Labor 
is  the  last  thing,  except  real  estate,  to  feel  the 
effect  of  a  change  in  the  currency  ;  because 
labor  is  more  abundant  than  any  other  com¬ 
modity.  Labor  feels  last  the  advance  caused 
by  the  inflation  of  paper  money.  I  trust  this 
proposition  when  discussed  by  the  people  will 
be  generally  repudiated,  and  I  believe  it  will 
be.  I  regard  this  limit  upon  the  amount  of 
greenback  currency  as  the  sheet  anchor  of  pub¬ 
lic  safety;  that  in  no  event  whatever  is  it  to  be 
violated. 

BANK  NOTES  AND  LEGAL  TENDERS. 

It  is  sometimes  said,  why  will  not  the  pro- 


9 


posed  increase  of  banking  circulation  have  the 
same  effect  as  the  increase  of  greenbacks.  This 
question  is  putin  regard  to  the  bill  reported  by 
my  friend  from  Missouri  [Mr.  Henderson] 
to  repeal  the  limitation  upon  the  amount  of 
banking  circulation.  I  answer  that  the  effect 
is  very  different.  The  amount  of  bank  notes 
may  be  left  free  without  any  legal  limit  if  only 
the  right  to  present  the  note  for  redemption  is 
always  enforced. 

Mr.  MORTON.  Redemption  in  what? 

Mr.  SHERMAN.  Redemption  at  present 
in  legal  tenders,  but  we  all  look  to  an  early 
resumption  of  specie  payments.  There  is  no 
check  on  banking,  there  is  no  use  in  banks, 
unless  you  have  specie  payments.  Banknotes, 
unless  they  are  based  on  the  payment  of  specie 
or  something  that  is  equivalent  or  will  soon 
be  equivalent  to  specie,  are  injurious,  and 
therefore  I  am  not  in  favor  of  any  increase  of 
the  bank  note  circulation  unless  it  is  in  view 
of  the  speedy  resumption  of  specie  payments. 
But,  sir,  if  bank  notes  are  based  on  coin,  or  if 
they  are  redeemable  in  coin,  their  amount 
may  be  left  to  the  demands  of  trade,  to  the 
wants  of  the  community.  The  power  to  pre¬ 
sent  them  for  payment  at  any  time  is  a  sufficient 
check  on  the  amount.  That  is  shown  by  the 
experience  of  many  countries.  In  England 
the  limit  is  very  rarely  reached.  In  New  York 
they  had  a  very  good  State  system,  which,  if 
it  had  been  extended  all  over  the  United  States, 
under  the  control  of  the  General  Government, 
would  have  been  a  wise  one.  That  was  a  sys¬ 
tem  of  free  banking  under  which  any  man 
might  bank  who  would  keep  up  the  specie 
standard,  and  give  the  requisite  security  to  the 
public  and  redeem  his  notes  in  specie. 

REDEMPTION  OF  BONDS  IN  EXISTING  CURRENCY. 

1  come  now  to  the  third  mode  that  has  been 
suggested,  and  that  I  have  necessarily  dis¬ 
cussed  as  I  have  proceeded.  I  here  again  de¬ 
sire  to  repeat  that,  in  what  I  have  to  say  in 
regard  to  the  manner  of  paying  or  redeeming 
the  bonds,  I  do  not  speak  for  the  Committee 
on  Finance,  because,  in  the  view  which  they 
took  of  it  in  the  bill  which  they  reported,  they 
did  not  decide  that  question.  I  merely  pre¬ 
sent  the  argument.  1  say  that  equity  and  jus¬ 
tice  are  amply  satisfied  if  we  redeem  these  bonds 
at  the  end  of  the  five  years  in  the  same  kind 
of  money,  of  the  same  intrinsic  value  it  bore 
at  the  time  they  were  issued.  Gentlemen 
may  reason  about  this  matter  over  and  over 
again,  and  they  cannot  come  to  any  other  con¬ 
clusion  :  at  least,  that  has  been  my  conclusion 
after  the  most  careful  consideration.  Sena¬ 
tors  are  sometimes  in  the  habit,  in  order  to 
defeat  the  argument  of  an  antagonist,  of  saying 
that  this  is  repudiation.  Why,  sir,  every  citi¬ 
zen  of  the  United  States  has  conformed  his 
business  to  the  legal-tender  clause.  He  has 
collected  and  paid  his  debts  accordingly. 
Every  State  in  this  Union,  without  exception, 
has  made  its  contracts  since  the  legal- tender 
clause  in  currency  and  paid  them  in  currency. 
Indeed,  every  State  in  this  Union  except  Mas¬ 
sachusetts  has  gone  further,  and,  as  I  think, 
improperly,  in  paying  either  principal  or  in¬ 


terest  of  preexisting  debts  contracted  on  the 
basis  of  gold. 

Mr.  COLE.  The  Senator  must  except  Cali¬ 
fornia  from  that  statement. 

Mr.  DIXON.  The  Senator  should  except 
Connecticut. 

Mr.  SHERMAN.  Connecticut  pays  her  in¬ 
terest  in  paper. 

Mr.  DIXON.  Only  on  debts  contracted 
since  the  passage  of  the  legal-tender  act.  But 
the  Senator  began  by  saying  that  there  was 
a  wide  distinction  between  the  right  of  a  citi¬ 
zen  to  pay  a  debt  under  the  legal-tender  act 
and  the  right  of  a  State  or  a  Government  to 
do  it. 

Mr.  SHERMAN.  I  do  say  that  as  to  pre¬ 
existing  debts,  but  as  to  debts  contracted  since 
the  legal-tender  law  took  effect,  they  were  con¬ 
tracted  in  currency,  and  upon  the  express  stip¬ 
ulation  in  the  law  that  their  principal  should 
be  paid  in  legal  tenders  and  the  interest  in 
coin.  If  that  stipulation  was  not  in  the  law 
the  right  to  redeem  would  only  -rest  upon  the 
general  principle  that  a  debt  may  be  paid  in 
the  kind  of  money  in  which  it  was  contracted. 

But  public  as  well  as  private  debts  con¬ 
tracted  since  the  legal-tender  act  do  not  rest 
upon  inference  but  upon  the  express  stipula¬ 
tion  in  the  law;  and  it  is  equitable  and  right 
that  the  United  States  should  avail  itself  of  this 
part  of  the  contract. 

IS  THE  OFFER  TO  EXCHANGE  A  THREAT. 

Sometimes  this  bill  has  been  regarded  as  a 
threat.  We  do  not  so  intend  it.  We  say  to  the 
holder  of  our  demand  notes,  we  say  to  the  holder 
of  our  bonds,  we  say  to  the  holder  of  a  com¬ 
pound-interest  note,  we  say  to  the  holder  ofany 
public  security,  except  the  existing  ten-forties, 
“We  will  give  each  of  you,  at  your  option, 
this  form  of  security  in  exchange  for  that  which 
you  now  have ;  if  you  accept  this  offer  by  the 
1st  of  November  next  we  will  give  you  certain 
exemptions  ;  if  not,  you  stand  upon  your  exist¬ 
ing  right,  and  all  questions  affecting  it  shall  be 
postponed  until  the  next  session  of  Congress.” 
It  is  said  that  this  is  a  threat.  I  do  not  so 
regard  it. 

Mr.  FESSENDEN.  Will  my  friend  allow 
me  to  ask  him  a  question,  with  his  permission? 

Mr.  SHERMAN.  Certainly. 

Mr.  FESSENDEN.  I  ask  whether  the  com¬ 
mittee  have  provided  any  alternative  in  case  the 
bondholders  do  not  accept? 

Mr.  SHERMAN.  None.  Their  bonds  still 
stand,  and  no  one  proposes  the  alternative 
adopted  by  the  English  Government,  which  1 
intend  to  refer  to  in  a  moment,  of  stopping  the 
interest,  or  the  alternative  adopted  by  our  own 
Government  under  Hamilton’s  plan  of  reduc¬ 
ing  the  interest.  We  leave  the  bondholders 
to  stand  precisely  as  they  are,  and  they  will 
be  paid  their  six  per  cent,  interest  in  gold  un¬ 
til  their  bonds  are  redeemed,  and  they  cannot 
be  redeemed  under  existing  laws  without  further 
legislation,  and  that  legislation  will  have  to  be 
provided  by  the  present  Congress  at  its  next 
session  or  by  some  future  Congress.  All  that 
the  Committee  on  Finance  do  in  this  bill — and, 
perhaps,  in  discussing  the  other  points  I  have 


10 


gone  beyond  the  necessity  of  the  case — is  to 
offer  to  all  the  public  creditors  these  new  bonds 
in  exchange  for  the  old,  to  be  done  without 
expense  to  the  Government,  to  be  done  with¬ 
out  sacrifice  by  any  one,  leaving  every  man  to 
judge  for  himself  whether  his  interest  and  sub¬ 
stantial  equity  would  not  be  promoted  by  this 
exchange,  if  he  does  not  do  it  he  stands  by 
his  bond,  and  then  the  next  Congress  or  the 
present  Congress  at  its  next  session  will  decide 
the  question  whether  the  redemption  of  these 
bonds  shall  be  postponed  to  some  indefinite 
future  when  we  may  be  able  to  pay  gold  for 
what  we  received  in  depreciated  paper.  We 
do  not  decide  it  and  do  not  undertake  to  decide 
it,  but  we  simply  submit  that'option. 

Even  if  Senators  do  not  agree  in  the  view  that 
I  take  of  this  matter,  it  is  necessary  to  provide 
this  new  loan  for  this  reason :  we  must  provide 
for  the  funding  of  some  one  hundred  and  odd 
millions  of  loan  that  is  maturing ;  we  must  pro¬ 
vide  for  the  redemption  of  the  compound-inter¬ 
est  notes;  we  must  provide  for  the  conversion  of 
the  greenbacks,  which  we  do  in  another  section  ; 
we  must  provide  some  bond  into  which  even  the 
floating  debt  may  go  ;  and  it  is  necessary  in 
making  that  bond  to  select,  if  possible,  a  bond 
into  which  the  whole  mass  of  the  public  debt 
may  from  time  to  time  be  converted  according 
to  our  future  laws. 

Mr.  FESSENDEN.  Are  not  those  obliga¬ 
tions  convertible  into  five-twenties  as  the  law 
now  stands? 

Mr.  SHERMAN.  Undoubtedly;  but  would 
any  Secretary  now  convert  any  more  of  our 
currency  debt  into  five-twenty  bonds  bearing 
six  per  cent,  interest  in  gold?  As  I  shall  show 
hereafter,  there  is  no  such  burdensome  loan 
negotiated  by  any  civilized  nation  in  the  world 
as  our  five-twenty  loan,  if  it  is  to  be  paid  in 
gold.  Therefore,  I  would  say,  in  reply  to  ray 
friend’s  question,  as  I  said  two  years  ago,  that 
I  never  would  issue  another  five-twenty  bond, 
because  it  is  the  most  expensive  form  of  loan. 
Just  consider  it:  seventy-six  dollars  of  gold 
will  buy  a  five-twenty  bond  bearing  six  per 
cent,  interest  in  gold,  and  that  bond  cannot  be 
redeemed,  according  to  one  construction,  until 
the  United  States  are  ready  not  only  to  pay 
six  per  cent,  on  $100  for  the  use  of  seventy- 
six  dollars,  but  also  to  pay  $100  in  gold  for 
what  now  costs  seventy-six  dollars.  That  is 
the  proposition,  and  I  say  I  never  would  issue 
another  five-twenty  bond.  I  think  our  great 
mistake  has  been  that  we  have  funded  a  great 
mass  of  our  floating  debt  already  into  five- 
twenties  and  given  to  the  public  creditors  the 
right  to  demand  this  large  rate  of  interest  for 
so  long  a  time. 

FUNDING  OF  ENGLISH  DEBT. 

Now.  I  wish  to  show,  as  we  are  governed  in 
a  great  measure  by  example,  that  the  proposi¬ 
tion  made  [>y  the  Committee  on  Finance  is  in 
exact  accordance  with  the  course  that  has  been 
pursued  in  England  six  or  seven  times,  and 
once  in  our  own  country.  In  England,  prior 
to  1715,  the  rate  of  interest  was  six  per  cent., 
which  was  reduced  by  an  act  of  Parliament  to 
five  per  cent.,  and  without  negotiation.  In 


1725,  after  the  explosion  of  the  South  Sea  bub¬ 
ble,  the  rate  of  interest  on  the  mass  of  the 
public  debt  was  reduced  from  five  per  cent,  to 
four  per  cent.  This  was  done  mainly  by  nego¬ 
tiation  through  the  great  corporations  of  Lon¬ 
don,  the  Bank  of  England,  the  South  Sea 
Company,  and  one  of  the  India  companies. 
They  reduced  the  interest  by  issuing  four  per 
cent,  annuities  in  payment  of  five  per  cents.* 
paying  off  what  were  called  the  dissentients. 

In  the  middle  of  the  eighteenth  century  the 
rate  of  interest  all  over  Europe  became  lower 
than  ever  was  known  before.  It  fell  to  three 
per  cent.  In  1787  it  ivas  proposed  in  England 
to  reduce  the  interest  on  the  public  debt  from 
four  to  three  percent. 

This  passed  the  House  of  Commons  two 
readings  and  was  lost  on  the  third.  In  1742 
a  similar  attempt  was  made  to  reduce  the  rate 
of  interest,  and  in  1749,  under  the  administra¬ 
tion  of  Mr.  Pelham,  it  was  carried  into  execu¬ 
tion,  and  we  have  in  Hansard’s  Debates,  and 
also  in  the  biography  of  Mr.  Pelham,  an  exact 
account  of  this  transaction.  Mr.  Pelham  was 
warned  before  he  made  this  proposition  of  the 
effect  upon  himself,  but  he  persisted  in  it  and 
finally  carried  it  through,  after  quite  an  ex¬ 
tended  argument.  His  proposition,  in  short* 
wTas  that  any  holder  of  any  security  bearing 
four  per  cent,  interest  might,  within  a  given 
time,  present  it;  not  for  redemption,  but  ta 
receive  in  exchange  a  security  bearing  three 
and  a  half  per  cent,  interest  for  four  or  five 
years,  and  after  that  bearing  three  per  cent.. 
interest.  Nothing  was  said  about  redemption  ; 
but  it  was  understood,  no  doubt,  that  in  case 
holders  did  not  accept  it  their  securities  would 
be  redeemed.  The  result  was  an  angry  debate, 
in  which  it  was  alleged  that  this  was  a  violation 
of  the  public  faith.  I  read  a  note  in  Hansard’s 
Debates,  taken  from  Tindal.  Tindal  says: 

“  This  was  generally  looked  upon  to  be  a  very  bold 
measure  in  the  minister,  and  some  of  his  best  friends, 
even  the  day  before  the  vote  passed  in  the  House  of 
Commons,  endeavored  to  persuade  him  against  it. 
But  he  appeared  determined,  and  in  a  few  weeks 
they  approved  of  his  steadiness  as  much  as  before  they 
blamed  his  obstinacy.” 

I  read  from  Mr.  Pelham’s  biography  what  is 
there  said  on  the  subject : 

“  Duly  impressed  with  the  importance  of  his  finan¬ 
cial  plan,  Mr.  Pelham  suffered  no  avoidable  delay  to- 
intervene  before  he  submitted  it  to  the  House.  By 
this  promptitude  he  manifested  the  decision  of  a 
great  minister,  for  the  proposal  was  at  first  so  un¬ 
popular  or  so  little  understood  that  even  on  the  very 
day  before  the  resolutions  were  brought  forward 
some  of  his  friends  endeavored  to  dissuade  him  from 
his  purpose;  but  their  remonstrances  wereineffectual. 
He  persevered  in  his  determination,  and  the  event 
fully  justified  his  expectations.  On  the  28th  of  No¬ 
vember  a  motion  was  made  for  a  committee  of  the 
whole  House,  to  take  that  part  of  his  majesty’s  speech 
into  consideration  which  related  to  the  national  debt. 
The  expediency  of  reducing  the  interest  had  been  so 
clearly  demonstrated  by  Mr.  Pelham,  that  his  plan 
was  unanimously  approved.” 

The  great  corporations  which  had  aided  in 
the  former  reduction  in  the  interest  of  the  public 
debt  combined  against  it,  and  for  two  years 
defeated  it.  The  House  of  Commons  was  firm 
and  threatened  to  repeal  some  of  their  privi¬ 
leges,  and  finally  compelled  them  to  acquiesce. 

There  is  a  still  more  interesting  case,  and  one 


11 


more  applicable  to  our  present  condition,  which 
occurred  in  England  in  1822.  During  the  wars 
which  probably  tested  the  power  of  England 
more  than  any  event  in  her  history — her  wars 
with  Napoleon — she  was  compelled  to  resort  to 
great  sacrifices.  She  issued  all  manner  of  securi¬ 
ties  ;  she  sold  her  bonds  at  one  time  at  fifty  or 
sixty  cents  on  the  dollar ;  she  issued  five  per 
cents.,  four  per  cents.,  and  three  per  cents., 
and  all  other  forms  of  security.  After  the  war 
was  over,  before  the  resumption  of  specie  pay¬ 
ments,  Mr.  Vansittart,  then  Chancellor  of  the 
Exchequer,  proposed  to  fund  the  public  debt 
by  a  proposition  very  similar  in  language  to 
the  one  submitted  now  b}^  the  Committee  on 
Finance.  The  great  mass  of  their  floating 
debt  consisted  of  five  per  cent,  exchequer 
bills — navy  bills,  as  they  were  commonly 
called — which  were  very  much  such  bills  as 
our  five-twenty  bonds.  They  bore  five  per  cent, 
interest.  Mr.  Vansittart  introduced  his  bill  on 
the  25th  of  February,  1822;  and  we  have  the 
whole  debate  in  Hansard.  His  proposition  is 
in  substance  like  our  own.  It  simply  declared 
that  the  holders  of  those  five  per  cent,  bills 
might  present  them  at  such  a  time  for  exchange 
for  a  four  per  cent,  annuity.  If  they  did  not 
present  their  securities  their  assent  was  im¬ 
plied.  There  was  some  opposition  to  the 
measure.  It  was  alleged  to  be  a  violation  of 
the  public  faith  ;  it  was  before  specie  payments 
were  resumed  in  England,  when  all  payments 
were  made  in  Bank  of  England  notes.  It  was 
finally  carried,  after  debate,  and  acquiesced  in. 

There  is  also  one  case  in  our  own  history,  and 
that  is  the  funding  system  adopted  by  Alexan¬ 
der  Hamilton.  The  Constitution  of  the  Uni¬ 
ted  States  declared  that  the  public  debt  of  the 
United  States  should  be  inviolate,  and  the 
new  Government  assumed  the  debt  of  the  old 
confederacy  ;  but,  as  a  matter  of  course,  it  was 
in  a  condition  of  great  uncertainty  ;  the  interest 
had  been  unpaid  for  a  long  time,  and  there 
were  disputes  as  to  the  amount.  Alexander 
Hamilton,  as  first  Secretary  of  the  Treasury, 
proposed  a  plan  of  funding  and  grouping  to¬ 
gether  all  this  mass  of  indebtedness.  His 
report  on  the  public  credit  was  regarded  by  his 
friends,  and  has  been  regarded  by  the  whole 
world,  as  a  remarkable  production;  and  yet, 
what  was  Alexander  Hamilton’s  funding  plan? 
He  proposed  first,  to  ascertain  the  amount  of 
the  national  debt,  which  was  finally  computed 
to  be  and  was  settled  at  $54,000,000,  foreign 
and  domestic.  Did  he  propose  to  pay  that  off 
in  precise  conformity  with  the  terms  on  which 
the  debt  was  contracted?  Not  at  all ;  betook 
that  and  he  also  ascertained  the  amount  of  the 
State  debts?  Nearly  all  the  States  were  over¬ 
whelmed  with  debts  that  grew  out  of  the  revo¬ 
lutionary  war,  and  they  were  ascertained  and 
apportioned  ;  the  general  aggregate  of  all  was 
$74,000,000.  How  was  this  funded  ?  By  offer¬ 
ing  the  fundholders  six  per  cent,  bonds  for 
two  thirds  of  their  debt,  and  the  other  third  was 
paid  by  three  per  cent,  bonds,  some  of  it  by 
four  per  cent,  bonds,  some  of  it  by  public  lands, 
and  some  of*  it  by  annuities.  The  plan  of  Al¬ 
exander  Hamilton  embraced  various  forms  of 


loan,  all  of  which  was  submitted  to  the  volun¬ 
tary  will  of  the  fundholders.  Some  of  them 
refused  to  agree.  What  did  he  do  then?  He 
only  paid  them  in  accordance  with  the  stipula¬ 
tions  made  as  to  the  rest  of  the  loans.  I  will 
read  a  short  paragraph  or  two  from  this  docu¬ 
ment  of  Mr.  Hamilton  to  show  how  he  regarded 
the  public  debt : 

“  The  interesting  problem  now  occurs :  is  it  in  the 
power  of  the  United  States,  consistently  with  those 
prudential  considerations  which  ought  not  to  be 
overlooked,  to  make  a  provision  equal  to  the  purpose 
of  funding  the  whole  debt,  at  the  rates  of  interest 
which  it  now  bears,  in  addition  to  the  sum  which  will 
be  necessary  for  the  current  service  of  the  Govern¬ 
ment? 

“The  Secretary  will  not  say  that  such  a  provision 
would  exceed  the  abilities  of  the  country;  but  he  is 
clearly  of  opinion  that  to  make  it  would  require  the 
extension  of  taxation  to  a  degree  and  to  objects 
which  the  true  interests  of  the  public  creditors  for¬ 
bids.  It  is  therefore  to  be  hoped,  and  even  to  be 
expected,  that  they  will  cheerfully  concur  in  such 
modifications  of  their  claims,  on  fair  and  equitable 
principles,  as  will  facilitate  to  the  Government  an 
arrangement  substantial,  durable,  and  satisfactory 
to  the  community.  The  importance  of  the  last  char¬ 
acteristic  will  strike  every  discerning  mind.  No  plan, 
however  flattering  in  appearance,  to  which  it  did  not 
belong,  could  be  truly  entitled  to  confidence.” 

Mr.  FESSENDEN.  What  provision  did  be 
make  for  those  who  did  not  agree  to  the  offer? 

Mr.  SHERMAN.  He  merely  provided  for 
four  per  cent,  interest  to  be  paid  to  them,  two 
per  cent,  less  than  they  were  entitled  to  under 
the  law  creating  the  debt.  After  speaking  of 
those  who  might  refuse  the  offer  he  proceeds 
to  say : 

“Hence,  whatever  surplus  of  revenue  might  re¬ 
main,  after  satisfying  the  interest  of  the  new  loans, 
and  the  demand  for  the  current  service,  ought  to  be 
divided  among  those  creditors  (if  any)  who  may  not 
think  lit  to  subscribe  to  them.  But,  for  this  purpose, 
under  the  circumstance  of  depending  propositions,  a 
temporary  appropriation  will  be  most  advisable,  and 
the  sum  must  be  limited  to  four  per  cent,,  as  the  rev¬ 
enues  will  only  be  calculated  to  produce  in  that  pro¬ 
portion  to  the  entire  debt. 

“  The  Secretary  confides  for  the  success  of  the  prop¬ 
ositions  to  be  made  on  the  goodness  of  the  reason 
upon  which  they  rest;  on  the  fairness  of  the  equiva¬ 
lent  to  be  offered  in  each  case;  on  the  discernment 
of  the  creditors  of  their  true  interest;  and  on  their 
disposition  to  facilitate  the  arrangement  of  the  Gov¬ 
ernment,  and  to  render  them  satisfactory  to  the 
community.” 

Isay  the  plan  now  proposed  by  the  Committee 
on  Finance  is  in  accordance  with  precedent, 
holds  out  no  threats,  deals  with  all  alike, 
holders  of  five- twenty  bonds,  greenbacks,  and 
all.  It  gives  them  a  proposition  to  fund  their 
debt  at  their  own  option  by  the  1st  of  Novem¬ 
ber  next,  or  if  they  will  not  choose  to  do  it, 
then,  as  a  matter  of  course,  the  question  is  to- 
be  decided  at  the  next  session  of  Congress,, 
what  provision  ought  to  be  made,  whether  oi 
not  Congress  will  redeem  the  five-twenty  bonds 
in  the  currency  in  which  they  were  contracted 
or  postpone  its  redemption,  paying  the  interest 
at  six  per  cent,  in  gold,  until  we  can  rede'em  the 
principal  in  gold.  Whatever  view  Senators 
may  take  of  this,  they  cannot  avoid  m’aking  some 
provision  by  some  loan  less  onerous  than  five- 
twenties  for  funding  the  greenbacks  and  for 
funding  the  floatingdebt  of  the  United  States: 
and  into  that  loan,  whatever  it  may  be,  the 
whole  debt  may  eventually  float. 


12 


TERMS  OF  THE  NEW  LOAN. 

Now,  Mr.  President,  the  question  is  whether 
the  terms  of  the  proposed  loan  arc  reasonable 
and  fair,  such  as  we  ought  to  propose  to  our 
own  citizens,  and  such  as  our  constituents  may 
reasonably  hope  to  fulfill,  such  as  are  equitable 
and  fair  as  between  creditor  and  tax-payer. 
The  first  question  that  arises  is  the  exemption 
from  State  taxation. 

No  Government  that  I  have  been  able  to  find 
ever  allowed  its  bonds  or  securities  to  be  taxed. 
The  United  States  never  did.  In  the  absence 
of  stipulations  to  the  contrary  the  courts  have 
always  held  that  no  State  or  subordinate  au¬ 
thority  could  tax  the  national  securities.  It 
has  been  so  held  by  every  judge  who  ever  sat 
upon  the  supreme  bench,  because  it  has  hap¬ 
pened  that  cases  of  the  kind  were  brought  be¬ 
fore  the  courts  from  time  to  time  from  the 
earliest  foundation  of  the  Government  until 
the  last  case  in  2  Black,  in  18G2,  and  it  has 
been  uniformly  held  that  there  is  no  power  in 
the  States  to  tax  Government  bonds.  It  may, 
it  is  true,  be  made  a  part  of  the  loan  that  the 
Stales  shall  have  a  power  to  tax  them,  but  who 
would  buy  such  bonds?  I  never  would  vote 
for  such  a  provision.  I  never  would  allow  a 
subordinate  authority  to  thus  control  the  pub¬ 
lic  credit  of  the  United  States  or  have  a  voice 
in  the  matter.  The  effect  in  time  of  war  would 
be  disastrous.  Such  a  power  would  prevent 
the  citizens  of  a  State  where  the  power  -was 
exercised  from  loaningmoney  upon  Government 
securities.  I  take  it,  therefore,  as  an  axiom, 
that  in  no  event  shall  we  allow  subordinate 
authorities  to  tax  the  national  securities.  I 
need  not  refer  to  the  authorities  on  this  sub¬ 
ject.  I  have  done  that  before,  and  I  suppose 
that  Senators  are  familiar  with  them.  'I here 
are  ’ht  least  five  or  six  dilferent  decisions  of  the 
Supreme  Court  to  this  effect. 

The  next  provision  is  the  exemption  from 
any  discriminating  property  tax.  Men  who 
do  not  understand  the  question  have  proposed 
to  tax  Government  securities  specially,  like  a 
special  tax  on  manufactures;  and  the  proposi¬ 
tion  has  been,  perhaps,  broached  in  Congress  to 
tax  Government  securities  one  or  two  percent, 
in  lieu  of  all  other  taxes.  Such  a  provision 
would  be  a  clear  and  palptfble  violation  of  the 
Constitution  and  of  the  law.  It  would  be  worse 
than  repudiation;  it  would  be  the  meanest  kind 
of  repudiation.  Why?  Because  it  would  be  a 
special  discriminating  tax  on  property.  A  tax 
on  manulactures  is  a  tax  on  consumption.  The 
manufacturer  may  add  that  tax  to  the  cost  of 
the  article,  and  the  consumer  who  finally  uses 
the  article  pays  the  tax.  That  is  the  principle 
upon  which  it  rests.  A  special  tax  on  property 
is  a  diminution  of  the  property.  It  cannot 
be  collected  from  any  one  else  or  shared  with 
any  one.  It  is  a  direct  tax — as  much  so  as  if 
levied  on  farms — and  being  a  direct  tax  is 
unconstitutional,  unless  apportioned  among  the 
States  according  to  population. 

One  of  the  earliest  cases  which  came  before 
the  Supreme  Court  was  the  well-known  case 
involving  a  tax  on  carriages.  There  the  court 
held  that  it  was  the  use  of  the  carriage  which 


was  taxed,  and  that  was  a  proper  tax,  because 
it  was  a  tax  on  the  use  of  a  luxury.  It  was  the 
enjoyment  or  use  of  the  carriage  that  was  taxed, 
not  the  property  in  the  carriage.  No  special 
tax  can  be  levied  on  property.  If  this  principle 
once  prevailed,  that  we  might  select  any  kind  of 
property  and  levy  a  discriminating  tax  on  that 
property,  the  time  might  come  when  shipping 
might  be  selected  as  the  subject  of  a  special 
tax ;  when  property  in  lands,  plainly  against  the 
intention  of  the  Constitution,  might  be  selected 
for  the  levying  of  a  discriminating  tax.  We 
propose,  therefore,  to  avoid  all  controversy,  to 
put  a  stipulation  in  the  new  loan  law  exempt¬ 
ing  these  bonds  from  all  discriminating  taxation 
by  Congress,  but  leaving  them  subject  to  the 
same  income  tax  that  other  income  is  subject  to. 

AS  TO  THE  RATE  OF  INTEREST 

There  is  some  difference  of  opinion';  and 
you  will  hear  more  of  it  from  my  friend  from 
Missouri  [Mr.  Henderson]  as  to  the  rate  of 
interest  of  the  new  bonds.  The  Committee  on 
Finance  took  great  care  in  deciding  this  ques¬ 
tion.  We  believed  that  five  per  cent,  was  as 
low  a  rate  as  we  could  now  hope  to  negotiate 
a  loan.  It  is  the  lowest  rate  of  interest  ever 
provided  for  in  any  loan  act  of  the  United 
States,  except  in  the  funding  scheme  of  Alex¬ 
ander  Hamilton,  already  referred  to,  where  a 
certain  portion  of  the  debt  was  funded  at  three 
per  cent.  1  have  looked  with  care  into  recent 
foreign  loans,  and  I  find  that  no  Government 
in  Europe  has  recently  sold  its  bonds  at  a  less 
rate  of  interest  than  five  per  cent.  When  the 
nominal  rate  was  lower  they  were  sold  at  a  dis¬ 
count.  The  English  loans,  during  the  Napo¬ 
leonic  war,  yielded  the  lender  a  rate  of  inter¬ 
est  averaging  over  five  per  cent.  I  have  on 
that  subject  a  number  of  authorities,  and  I 
will  refer  to  one  or  two  of  them. 

in  the  compendium  of  finance  which  I  have 
before  me  there  is  a  statement  of  the  amount 
of  the  various  loans  negotiated  by  the  English 
Government  during  the  second  French  revolu- 
(  tionary  war.  The  whole  amount  of  loans  ne¬ 
gotiated  was  £420,905,400  sterling,  or  over  two 
thousand  million  dollars.  The  amount  actual^ 
received  from  those  loans  by  the  Government 
was  £266,800,000  sterling,  or  at  the  rate  of 
about  sixty  per  cent.  The  securities  were 
mainly  three  per  cents,  though  large  sums  bore 
four  and  five  per  cent.,  so  that  the  rate  of  in¬ 
terest  actually  paid  was  over  five  per  cent. 
In  1815,  after  Bonaparte  had  left  the  island  of 
Elba,  when  it  became  necessary  for  the  English 
Government  to  negotiate  a  large  loan,  they  sold 
£66,000,000  of  three  and  four  percent,  consols 
for  £36,000,000  sterling,  or  about  fifty-six  cents 
on  the  dollar. 

So  it  is  in  France.  We  have  all  heard  about 
the  popular  loan  in  France  during  the  Crimean 
war,  and  it  was  regarded  as  a  remarkable  suc¬ 
cess  in  its  time.  It  was  undoubtedly  very 
popular  in  France.  The  first  loan,  on  the  14th 
of  March,  1854,  was  for  250,000,000  francs. 
It  was  sold  at  the  rate  of  100  francs  of  three 
per  cents,  for  sixty-five  francs  and  twenty-five 
|  centimes,  and  at  the  rate  of  100  francs  at  four 
1  and  a  half  por  cent,  for  ninety-two  francs  and 


13 


fifty  centimes,  making  really  a  little  over  five 
per  cent. 

The  ordinary  legal  rate  of  interest  in  most  of 
the  States  is  seven  per  cent.,  and  the  actual  rate 
among  merchants  often  amounts  to  ten  per 
cent.  We  have  by  the  discrimination  made  in 
favor  of  these  bonds  reduced  the  rate  to  five 
per  cent.,  and  it  seems  to  me  that  is  as  low  as 
it  is  possible  to  negotiate  this  loan.  As  a  mat¬ 
ter  of  course,  if  1  believed  it  was  in  the  power 
of  the  Government  without  adopting  measures 
injurious  to  the  public  interest  to  negotiate  a 
bond  at  a  less  rate  of  interest,  I  would  gladly 
do  it;  but  after  full  examination  of  this  ques¬ 
tion  the  Committee  on  Finance  came  to  the 
conclusion  that  five  per  cent,  was  as  low  a  rate 
of  interest  as  the  loan  could  be  negotiated. 

There  are  various  reasons  why  the  rate  of 
interest  all  over  the  world  is  now  higher  than 
it  was  one  hundred  years  ago.  The  artificial 
wants  of  society  have  been  very  much  increased. 
We  have  railroads  and  steamboats  and  tele¬ 
graphs,  vast  avenues  and  sources  and  demands 
for  wealth  and  capital  that  one  hundred  years 
ago  Benjamin  Franklin  and  Doctor  Johnson 
never  thoughtof.  The  railroads  in  this  country 
at  this  time  are  worth  more  than  all  the  country 
was  wortli  at  the  time  of  the  revolutionary  war. 
All  these  new  elements  of  social  progress  make 
demands  for  money,  and  therefore  raise  the 
rate  of  interest.  There  is  another  remarkable 
fact  which  causes  a  general  advance  of  the  rate 
of  interest  all  over  the  world  in  this  as  com¬ 
pared  with  the  last  century,  and  that,  is  the  vast 
addition  made  to  the  coinage  of  the  world. 
The  discovery  of  gold  and  silver  has  caused  an 
advance  in  the  rate  of  interest.  Why?  Because 
every  man  who  loans  money  now,  especially  on 
long  time,  knows  that  he  will  be  paid  off  at  the 
end  of  the  period  in  a  commodity  with  less 
productive,  purchasable  power  than  he  loans. 
The  actual  depreciation  in  gold  and  silver  coin 
for  a  number  of  years  has  been  a  little  over 
one  per  cent,  per  annum,  so  that  if  a  man  now 
lei  ids  $1,000,  pay  able  in  gold  twenty  years  hence, 
he  will  get  back  his  $1,000  at  the  end  of  twenty 
years  with  one  fifth  of  its  purchasable  power 
shorn  off  by  the  additions  in  the  meantime  to 
the  value  of  the  gold  and  silver  of  the  world. 
The  truth  is  now  that  while  real  estate  is 
advancing  money  is  depreciating.  All  pro¬ 
duction  s  are  advancing,  while  the  relative  power 
of  gold  and  silver  coin  to  other  commodities 
is  diminishing.  A  productive  four  per  cent, 
investment  in  real  estate  is  a  more  profitable 
investment  than  six  per  cent,  in  the  best  bonds 
in  the  world.  Why?  Because  those  bonds  in 
the  future  will  be  paid  off  in  gold  and  silver 
coin  when  it  has  less  purchasable  power  than 
it  has  now,  while  the  lands,  by  the  gradual 
increase  of  the  country,  are  increasing  in  value. 
The  one  diminishes  at  the  rate  of  one  percent, 
per  annum,  according  to  the  best  statisticians, 
and  the  other  increases  in  this  country  at  the 
rate  of  one  and  a  half  per  cent,  per  annum. 

Mr.  STEWART.  Allow  me  to  suggest  that 
that  depends  on  the  continued  production  of 
gold. 

Mr.  SHERMAN.  If  California  and  N'evada 


give  out  there  is  plenty  of  gold  in  other  por¬ 
tions  of  the  world.  There  is  no  danger  of  any 
diminution  of  the  quantity. 

I  say,  Mr.  President,  we  cannot  negotiate  a 
bond  bearing  a  less  rate  of  interest  than  five 
per  cent,  except  first  by  increasing  and  depre¬ 
ciating  the  greenbacks,  and  that  certainly  we 
ought  to  oppose  to  the  utmost;  or  second,  by 
the  English  plan  of  selling  the  loan  below  par, 
to  which  our  people  are  not  accustomed,  and 
to  which  they  would  not  submit.  That  resort 
would  increase  nominally  the  public  debt.  Even 
if  the  rate  of  interest  should  be  more  favorable, 
the  popular  judgment  would  condemn  it,  be¬ 
cause  they  look  upon  a  debt  as  a  temporary  thing 
to  be  paid  off  in  full,  and  not,  as  in  England, 
a  permanent  thing,  the  principal  of  which  is 
never  to  be  paid,  and  the  interest  only  to  be 
provided  for. 

There  is  this  great  difference  between  our 
system  and  the  English  system.  In  England 
they  sell  their  credit  below  par.  They  fix  the 
rate  of  interest  and  they  sell  securities  in  open 
market  at  what  they  will  bring.  In  this  coun¬ 
try  we  fix  the  price  of  our  bonds  at  par  and  ask 
money  lenders  at  what  rate  of  interest  will  you 
loan  us  money.  That  is  thediffercnce.  Why 
is  it  so?  Because  in  England  they  do  not  an¬ 
ticipate  the  payment  of  the  principal. 

There  is  another  way  in  which  1  suppose  we 
might  negotiate  a  bond  at  a  low  rate  of  inter¬ 
est  ;  and  that  is,  by  postponing  the  payment  of 
the  principal  to  an  indefinite  ppriod.  That, 
however,  is  against  the  American  notions  of 
finance.  Our  people  have  always  looked  upon 
a  debt  as  a  burden  to  be  paid  off  as  rapidly  as 
possible,  and  public  opinion  and  good  policy 
would  not  tolerate  the  making  of  a  very  long 
loan,  and  I  for  one  would  not,  under  any  cir¬ 
cumstances,  vote  for  one  which  it  would  not  be 
within  the  power  of  the  Government  to  redeem 
within  twenty  years. 

'The  public  is  already  familiar  with  the  ten- 
forty  five  per  cent.  loan.  They  know  what  it 
is.  It  is  known  in  every  cabin  in  all  this  land. 
A  bond  at  four  per  cent,  or  any  other  less  rate 
of  interest  would  be  looked  upon  as  confisca¬ 
tion;  you  could  not  negotiate  it;  five  per  cent, 
is  now  about  par,  and  we  can  sell  a  five  per 
cent,  bond  without  increasing  the  greenbacks  a 
single  dollar.  I  do  not  desire  to  see  the  green¬ 
backs  increased  beyond  their  present  amount. 
There  is  no  necessity  for  it.  We  can  reduce 
the  rate  of  interest  from  six  to  five  per  cent, 
without  increasing  the  volume  of  greenbacks, 
and  we  can  thus  save  to  the  people  of  this 
country  $17,000,000  in  gold  per  annum  with¬ 
out  deranging  the  currency,  without  disorder¬ 
ing  the  money  market,  without  depreciating 
our  credit.  I  do  not  desire  to  force  upon  the 
market  a  loan  bearing  a  lower  rate  interest, 

!  which  will  either  require  more  greenbacks  to 
float  it,  or  require  us  to  sell  it  below  par,  or 
require  us  to  prolong  the  time  of  payments. 
We  can  negotiate  a  five  per  cent,  loan  now  in 
the  present,  state  of  the  money  market,  disor¬ 
dered  as  it  is  by  political  complications,  and 
1  desire  to  secure  that,  maintaining,  however, 
the  right  within  a  reasonable  time,  say  ten 


14 


years,  to  make  a  further  reduction  to  four  per 
cent.,  if  we  can,  after  that  to  three  per  cent. 'or 
whatever  public  credit  will  allow;  but  the 
attempts  now  to  reduce  the  rate  of  interest  to 
four  per  cent,  would  be  regarded  in  this  coun¬ 
try  and  abroad  as  a  species  of  confiscation. 

THE  PAYMENT  OF  THE  PRINCIPAL. 

The  section  of  this  bill  in  regard  to  the  pay¬ 
ment  of  the  principal  of  the  debt  only  estab¬ 
lishes  the  general  idea  that  the  debt  itself  shall 
be  paid  in  a  period  of  time.  The  Committee 
on  Finance,  after  much  reflection,  agreed  to 
fix  the  amount  which  should  be  annually  appli¬ 
cable  to  the  payment  of  the  principal  and 
interest  of  the  debt  at  $185,000,000.  The 
amount  of  the  interest  nowis  $129,500,000,  so 
that  we  appropriate  about  five  and  a  half  mil¬ 
lions  to  the 'payment  of  the  principal ;  but,  as 
a  matter  of  course,  this  sum  being  applied 
annually,  while  both  the  principal  and  the  in¬ 
terest  of  the  debt  is  being  reduced,  partly  by 
funding,  partly  by  payment,  partly  by  the 
operation  of  this  law,  the  interest  will  grad¬ 
ually  be  decreased,  and  the  amount  applicable 
to  the  principal  will  thus  annually  increase. 
If  all  our  debt  is  funded  into  a  five  per  cent, 
loan  except  the  long  bonds  of  1881,  and  the 
amount  should  be  $2,200,000,000,  leaving  out¬ 
standing  the  present  amount  of  greenbacks 
and  no  more,  the  interest  on  the  debt  would 
cease  to  be  a  burden,  and  the  difference  be¬ 
tween  the  amount  appropriated  and  the  amount 
required  to  .pay  the  interest  would  gradually 
pay  off  the  principal  of  the  debt.  1  have  a 
table,  prepared  at  the  Treasury7  Department, 
showing  the  precise  operation  of  tiffs  plan,  by 
which  it  will  appear  that  it  would  pay  off  the 
debt  by  1909. 

CONVERSION  OF  UNITED  STATES  NOTES. 

Mr.  President,  I  desire  now  to  make  a  few 
observations  in  regard  to  the  sections  of  the 
bill  relating  to  the  United  States  notes;  and 
these  I  consider  as  vitally  important.  We  pro¬ 
pose  to  restore  to  the  United  States  note  the 
right  to  be  funded  at  the  pleasure  of  the  holder 
into  the  new  bonds  whenever  he  desires. 
There  is  more  ground  of  discontent  and  more 
real  discontent  among  the  people  of  this  coun¬ 
try  because  ofthe  discrimination  made  between 
the  bondholder  and  the  holder  of  the  green¬ 
back  than  from  any  other  cause.  You  com¬ 
pel  every  citizen  of  this  country  to  take  the 
greenback  as  money,  willing  or  unwilling.  It  is 
the  measure  ofthe  value  of  his  labor;  and  yet 
it  has  no  purchasable  power  except  the  hope 
that  in  some  future  time  the  United  States 
will  redeem  it.  It  may  be  forced  upon  another 
man  in  payment  of  a  debt ;  it  may  be  applied 
to  pay  taxes  ;  but  it  cannot  be  converted  into 
income  except  at  a  discount. 

A  man  cannot  take  United  States  notes  pay¬ 
able  on  demand  to  any  broker  and  receive  in 
exchange  any  form  of  security  issued  by  the 
United  States.  There  is  a  wide  discrimination 
made  between  the  bondholder  and  the  note¬ 
holder,  which  gives  rise  to  popular  clamor  and 
is  the  cause  of  a  great  deal  of  just  complaint. 
In  18G3  we  were  compelled  for  wise  purposes 
to  take  away  the  right  of  the  holder  of  the  green¬ 


back  to  fund  it,  because  we  wished  then  to 
force  our  loans  upon  the  market;  and  while 
that  right  was  outstanding  we  could  not  do  it. 
Now  that  the  war  is  over,  that  the  whole  pro¬ 
cess  of  funding  is  intended  to  be  voluntary  at 
the  discretion  of  the  noteholder,  we  ought 
promptly  to  restore  this  right  to  allow  the  note 
to  be  converted  at  any  time  into  some  kind  of 
bond;  and  we  propose  also  to  allow  the  bond 
to  be  converted  into  notes  keeping  within  the 
limit  of  notes  fixed  by  law.  Then  there  is  no 
discrimination  ;  the  bondholder  and  the  note¬ 
holder  are  both  public  creditors  ;  both  depend 
upon  the  public  faith.  The  noteholder  may 
go  to  the  Treasury  of  the  United  States  and 
demand  his  bond  ;  the  bondholder  may  go  also 
and  demand  his  note.  They  are  put  on  a  basis 
of  equality7.  This  destroys  all  speculation  in 
Government  securities.  Both  will  then  stand 
on  the  same  footing,  and  both  will  be  of  equal 
value.  The  noteholder  may  at  his  option  draw 
interest  in  gold  by  converting  it  into  bonds, 
and  the  popular  cry  of  demagogues  that  we  have 
provided  gold  for  the  bondholder  and  notes 
for  the  people  will  be  silent. 

And,  sir,  there  is  now  no  reason  why  the 
note  issued  to  the  laboring  man  should  now 
be  less  valuable  than  any  other  form  of  Gov¬ 
ernment  security.  It  makes  one  of  those  salient 
points  before  a  popular  audience  just  and  cor¬ 
rect,  which  is  the  cause  of  complaint,  and  will 
be  until  it  is  removed.  An  important  effect  of 
this  provision  will  be  to  furnish  money  to  re¬ 
deem  the  bonds  or  any  other  securities  that 
offer,  and  without  resorting  to  a  sale  of  bonds. 
I  do  not  propose,  nor  do  the  committee  con¬ 
template,  the  issue  of  any  new  greenbacks. 
We  suppose  that  the  process  of  funding  these 
notes,  they  pouring  into  the  Treasury,  will 
furnish  ample  means  to  redeem  all  the  out¬ 
standing  bonds  and  securities  as  they  become 
redeemable.  I  have  no  doubt  the  same  pro¬ 
cess  will  go  on  here  that  occurred  in  Europe — 
a  very  small  amount  of  money  will  pay  a  large 
amount  of  bonds.  The  mass  of  the  bonds  will 
be  exchanged  without  money.  The  transac¬ 
tions  paid  by  money  compared  with  the  trans¬ 
actions  paid  by  checks  and  other  forms  of 
paper  are  as  one  to  a  thousand.  The  daily7 
balances  in  the  exchanges  in  the  New  York 
clearing-house  amount  to  many  millions,  and 
yet  the  amount  of  currency  to  pay  these  bal¬ 
ances  is  often  less  than  one  per  cent,  of  their 
nominal  amount.  Other  reasons  may  be  given 
for  the  new  feature  of  this  bill  giving  the  holder 
of  these  bonds  the  right  to  convert  them  into 
notes.  This  is  indispensably  necessary  to 
guard  against  sudden  contraction  and  panic. 
There  are  times  when  the  notes  will  float  into 
bonds  so  rapidly  as  to  contract  the  currency, 
and  thus  derange  business  and  prevent  the 
movement  of  crops.  This  privilege  will  give 
flexibility  and  movement  to  the  currency  of 
the  country.  Every  exchange  will  be  a  benefit 
to  the  Government.  If  the  holder  of  &  Gov¬ 
ernment  security  bearing  interest  surrenders 
it  to  the  Treasury  for  a  note  without  interest 
the  United  States  saves  the  interest.  If,  on 
the  contrary,  the  notes  are  funded  for  a  bond 


15 


the  notes  may  be  used  in  the  redemption  of 
other  bonds  bearing  a  higher  rate  of  interest. 
If  the  money-market  becomes  stringent,  if 
currency  becomes  scarce,  the  holder  may  be 
willing  to  surrender  his  bond  bearing  five  per 
cent,  interest  in  gold  in  order  to  get  currency 
with  which  to  pay  his  debts,  and  why  not 
give  him  that  privilege?  It  is  a  benefit  to  the 
United  States,  and  it  is  the  only  mode  by  which, 
during  the  suspension  of  specie  payments,  we 
may  make  a  flexible  currency. 

And,  sir,  this  loan  will  be  the  great  saving 
fund  of  the  people  of  the  United  States.  Every 
man  having  money  for  a  time  idle  will  float 
it  into  these  ten-forty  bonds,  and  while  we 
have  the  money  we  shall  pay  off  bonds  bearing 
a  higher  rate  of  interest.  When  he  desires  it 
again, he  can  come  back  and  get  the  bond,  and 
so  this  operation  maybe  carried  on  with  perfect 
safety.  Now  the  deposits  in  the  saving  banks 
amount  to  over  five  hundred  million  dollars. 
Why  should  not  this  money  be  deposited  in  the 
Treasury?  Why  should  not  these  little  streams 
of  the  savings  of  the  laboring  man  help  to 
float  the  public  credit  ?  The  Government  of 
the  United  States  ought  not  to  feel  too  high  to 
acknowledge  the  services  of  such  a  fund.  They 
will  be  useful.  They  will  enable  the  depositor 
to  get  the  full  value  of  his  money.  Now  he 
deposits  in  savings  banks,  where  he  gets  four 
or  five  per  cent,  interest  in  paper  money. 
Under  this  provision  he  may  put  his  money  in 
these  bonds,  and  the  money  thus  deposited 
will  enable  the  Government  to  pay  off  bonds 
bearing  a  higher  rate  of  interest.  In  every 
view  we  could  take  of  this  proposition,  after 
the  most  ample  consideration,  we  thought  it 
was  a  wise  provision,  and  would  work  well. 
The  trouble  and  cost  of  printing  these  bonds 
and  exchanging  them  one  for  another,  being 
carried  on  at  the  Treasury  Department  or  at 
the  depositories,  or  other  proper  places  of  ex¬ 
change,  will  be  done  without  cost  except  that 
of  printing.  It  is  purely  voluntary,  and  will 
be  adapted  to  the  wants  of  trade.  It  will  tend 
to  give  increased  value  to  the  United  States 
notes;  and  my  firm  conviction  is  that  under 
this  process  both  notes  and  bonds  will  grad¬ 
ually  rise,  step  by  step,  until  they  reach  the 
standard  of  gold,  and  then  this  whole  process 
ceases  according  to  the  provisions  of  the  bill. 
I  look  upon  this  provision  as  the  most  rapid 
way  to  specie  payment. 

The  only  other  section  of  the  bill  to  which  I 
have  not  alluded  is  that  which  legalizes  con¬ 
tracts  in  gold.  That  is  right  in  itself.  I  always 
supposed  that  the  legal-tender  act  was  not  in¬ 
tended  to  affect  the  right  of  the  people  to  nego¬ 
tiate,  buy,  and  sell  gold,  if  they  chose.  Some 
of  the  courts,  however,  have  decided  otherwise. 
Whatever  the  law  may  be,  there  is  no  objec¬ 
tion  to  unlocking  the  hoards  of  gold,  and 
allowing  the  people  to  deal  in  it  as  they  choose. 
It  makes  another  addition  to  the  currency,  and 
will  gradually  make  our  people  become  accus¬ 
tomed  to  dealings  and  transactions  in  gold  and 
will  tend  in  the  right  direction.  Where  one 
man  lends  gold  to  another  man,  it  is  equitable 
that  he  should  have  gold  back  in  payment,  and 


it  is  very  inequitable  for  the  debtor  in  such  a 
case  to  refuse  to  pay  it,  and  make  a  fraud  of 
the  law.  I  think  it  will  be  beneficial  to  insert 
this  provision,  because  dealing  in  gold  will  have 
a  tendency  toward  specie  payments. 

I  have  thus,  Mr.  President,  presented  the 
leading  provisions  of  this  bill.  I  appreciate 
the  difficulties  of  the  subject  and  the  personal 
responsibility  I  assume  in  advocating  a  meas¬ 
ure  that  may  fail  of  its  purpose.  It  is  far  easier 
to  sit  quiet,  to  propose  nothing,  and  criticise 
the  measures  of  others;  but  such  I  do  not  un¬ 
derstand  to  be  the  duty  of  your  Committee  on 
Finance.  We  are  actuated  by  the  earnest  de¬ 
sire  to  reduce  the  burdens  of  the  people  with¬ 
out  injury  to  the  public  credit  or  injustice  to 
the  public  creditor,  by  a  firm  conviction  that 
the  offer  here  made  to  the  bondholder  is  fair, 
equitable,  and  honorable,  and  that  its  accept¬ 
ance  would  not  only  save  an  annual  expendi¬ 
ture  of  $17,000,000  in  gold,  but  would  settle, 
upon  a  proper  basis,  all  uncertainty  as  to  the 
mode  of  payment  of  the  public  debt,  and  still 
leave  open,  after  a  reasonable  time,  a  further 
reduction  of  interest,  if  practicable.  Further 
than  this  the  committee  does  not  go.  It  does 
not  provide  for  a  rejection  of  this  offer  ;  but  I 
repeat,  that  if  this  offer  is  rejected  I  will  not 
hesitate  to  vote  to  redeem  maturing  bonds  in 
the  currency  in  existence  when  they  were 
issued  and  with  which  they  were  purchased, 
carefully  complying,  however,  with  all  the  pro¬ 
visions  of  law  as  to  the  mode  of  payment  and  as 
to theamountofcurrency outstanding.  Thiscon- 
clusion  I  have  arrived  at  against  the  earnest  argu¬ 
ments  of  personal  and  political  friends  and 
against  my  own  personal  and  pecuniary  interests. 

But,  sir,  I  saw  two  years  ago — and  we  all  see 
clearly  now — that  the  existing  relation  between 
the  public  creditor  and  the  tax-payer,  by  which 
the  former  enjoys  all  the  blessings  of  a  Gov¬ 
ernment  without  cost,  receives  without  dimi¬ 
nution  a  higher  rate  of  interest  than  your  courts 
would  enforce  between  citizens,  and  may  de¬ 
mand  payment  of  the  principal  in  gold  for  paper 
lent,  while  your  courts  refuse  to  enforce  a 
special  contract  for  the  return  of  gold  for  gold. 
Such  a  system  cannot  endure  in  a  Government 
not  entirely  despotic  without  creating  discon¬ 
tent  that  may  endanger  the  fair  and  equitable 
performance  of  the  public  engagements.  You 
cannot  disguise  your  knowledge  of  this  grow¬ 
ing  discontent.  The  unavoidable  effect  of  ap¬ 
proaching  specie  payments  in  reducing  prices 
and  shrinking  values  will  increase  this  discon¬ 
tent.  In  that  painful  process  the  people  will 
see  that  the  untaxed  productive  annuities  of 
the  bondholder  alone  will  be  increased  in 
value,  while  all  other  forms  of  property  will  be 
reduced  in  value.  It  is  not  the  interest,  nor  do 
I  think  it  will  be  the  desire,  of  the  public  cred¬ 
itor  to  invite  this  discontent.  The  same  mo¬ 
tive  that  induced  him  to  trust  the  Government 
in  its  hour  of  peril  will  induce  him  to  accept 
equity  from  those  who  are  willing  to  do  equity. 
And,  sir,  his  patriotism  will  not  be  lessened 
when  he  reflects  that  while  his  money  aided  in 
j  the  good  cause  it  has  been  the  most  profitable 
j  investment  of  capital  he  could  have  made. 


16 


Senators  often  tell  us  that  we  must  not  be 
influenced  by  public  discontent  or  clamor. 

1  agree  with  this  when  the  discontent  is  not 
founded  upon  substantial  equity,  but  when  it  is 
founded  upon  equity  it  will  make  itself  felt 
through  you  or  over  you.  And  Senators  must 
remember  that  this  is  a  Government  of  the 
people,  for  the  people,  and  by  the  people.  It  is 
not,  like  the  Government  of  Great  Britain,  a 
despotic  oligarchy,  where  the  rights  of  property 
override  the  rights  of  persons  ;  where  the  laws 
are  made  to  add  to  the  accumulations  of  the 
rich,  though  hundreds  of  thousands  may  thereby 
be  pinched  with  poverty.  That  is  the  land  of 
entails,  where  the  offices  of  the  church  are 
bought  and  sold  as  property,  and  where  all 
that  is  good  in  life — office,  honor,  property — is 
confined  to  less  than  one  tenth  of  the  popu¬ 
lation — where  the  laws  are  studiously  framed 
to  exclude  the  poor  from  all  political  rights. 
We  borrow  from  these  people  of  kindred  blood 
many  of  the  best  guards  of  liberty,  but  we  must 
take  care  not  to  ingraft  on  our  republican 
system  the  leading  feature  of  their  present  Gov¬ 
ernment,  the  supremacy  of  property  over  labor. 

Their  wealth  consists  of  vast  accumulations 
of  property  produced  by  ages  of  labor.  A 
generation  adds  but  little  to  this  aggregate  of 
wealth;  therefore  their  laws  protect  property 
at  the  sacrifice  of  labor.  Here  all  the  acquisi¬ 
tions  of  the  past,  all  the  accumulations  to  this 
hour,  are  only  equal  to  the  accumulations  that 
will  be  made  by  labor  during  thenextten  years. 
Our  wealth  is  in  the  energy  and  sinews  of  thirty 
million  1‘reepeople — all  equal — each  workingfor 
himself,  with  no  privileged  hand  to  press  him 
down  in  the  race  of  life.  It  is  this  that  has  made 
our  history  like  the  tales  of  Arabian  fiction.  Our 
railroads  alone,  built  since  we  were  all  young,  j 
are  worth  $1,600,000,000,  ormorethan  theprop- 
erty  of  the  United  States  when  she  took  her  place 
among  the  nations  of  the  earth.  The  property  of 
the  State  of  Ohio  is  now  worth  more  in  gold  than 
that  of  all  the  colonies  when  they  proclaimed 
independence,  and  yet  Ohio  was  then  a  pathless 
wilderness  where  no  white  man  dwelt. 

The  entire  debt  of  the  Revolution,  which 
Alexander  Hamilton  approached  with  terror, 
which  our  ancestors  debuted  over  for  years, 
upon  which  parties  were  formed  and  dissolved, 
was  $75,740,111  30,  including  over  seventeen 
million  dollars  of  State  debts  assumed  ;  and  yet 
now  we  appropriate  one  half  of  that  sum  for 
pensions,  and  will  this  year  reduce  our  current 
expenses  more  than  that  sum.  All  this  vast 
progress  is  the  result  of  labor.  To  encourage, 
maintain,  and  reward  labor  must  be  the  prin¬ 
cipal  object  of  our  legislation.  Capital  can 
take  care  of  itself.  It  has  many  advantages  in 
competition  with  labor.  It  may  be  idle — labor 
cannot  be.  It  does  not  grow  hungry;  it  does 
not  become  cold  or  sick,  while  the  hand  of 
labor  must  be  supported  by  food  and  clothing, 
and  awaits  sickness  and  death.  Capital  is  only  j 
useful  to  the  country  as  it  gives  employment  | 
to  labor,  as  a  means  to  further  development, 
while  all  labor  tends  to  create  new  wealth. 


When  capital  is  invested  in  Government 
bonds  it  is  useful,  so  far  as  further  development 
is  concerned,  only  in  supplying  the  wants  of  the 
owner.  When  employed  in  most  ut.her  pur¬ 
suits  it  adds  to  the  national  wealth.  Certainly 
it  is  not  the  public  interest  to  make  this  invest¬ 
ment  so  profitable  and  attractive  as  to  draw 
into  it  the  capital  of  the  country  or  to  make  it 
so  permanent  as  to  become  a  privileged  aris¬ 
tocracy.  No  privilege  should  he  granted  to 
the  bondholder  that  is  not  granted  to  the  note¬ 
holder.  Both  are  public  securities,  and  both, 
and  equally,  can  appeal  to  the  public  faith. 
No  privilege  should  be  given  to  the  bond¬ 
holder  unless  it  is  compensated  for  by  some 
advantage  reserved  by  the  Government,  and 
the  whole  public  debt  should  be  made  to  assume 
such  form  that  it  may  be  a  part  of  the  circu¬ 
lating  capital  of  the  country  bearing  as  low  a 
rate  of  interest  as  practicable,  and  only  with 
such  exemptions  as  will  maintain  it  at  par  with 
gold.  Whether  this  bill  will  promote  these 
objects  it  is  for  the  Senate  to  say.  I  confi¬ 
dently  believe  it  will.  I  do  not  appeal  to  any 
party  for  the  support  of  this  measure,  for  it 
affects  all  alike.  All  must  contribute  to  the 
pifblic  taxes,  and  all  will  share  in  the  benefits 
of  any  relief. 

But  while  we  trust  our  political  adversaries 
may  supporfthis  as  a  measure  of  relief  to  our 
constituents,  yet  the  fate  of  the  bill  must  rest 
mainly  upon  the  Republican  party.  It  is  my 
pride  and  hope  that  this  powerful  political  or¬ 
ganization,  having  conducted  the  country  with 
safety  and  honor  through  the  most  memorable 
scenes  of  our  history,  may,  still  retaining  the 
confidence  of  the  people,  gradually  guide  them 
back  into  the  channels  of  peace,  reduce  their 
burdens,  relieve  them  from  oppressive  taxes, 
and  start  again  in  productive  labor  the  millions 
now  waiting  to  develop  the  greatest  country 
God  ever  gave  to  man. 

Now  distrust  seizes  upon  every  one.  Wild 
schemes  have  been  proposed,  which  drive  cap¬ 
ital  from  its  moorings.  Taxes  are  bearing 
heavily  upon  unprofitable  industry,  and  com¬ 
plaints  are  made  of  the  burden  and  distribution 
of  these  taxes.  Sectional  divisions  arealread}’ 
showing  their  hydra  heads,  and  disputes  as  to  the 
terms  of  public  engagements  cast  doubts  upon 
the  public  faith.  It  is  in  such  a  time  that  Con¬ 
gress  is  able  to  perform  its  highest  duty — that 
of  an  arbi,  rator.  Upon  questions  involving  the 
public  debt  it  is  the  only  arbitrator,  it  cannot 
shrink  from  this  duty.  I  trust,  sir,  before  this 
session  closes,  that  Congress  will  provide  for  the 
redemption  of  our  maturing  bonds,  thussaving 
ultimately  $17,000,000  a  year ;  that  it  will  adopt 
such  measures  as  will  gradually  make  the  dollar 
in  greenback  in  the  hands  of  the  laboring  man 
equal  to  a  dollar  in  gold  ;  that  it  will  throw  off 
the  great  mass  of  our  internal  taxes,  and  reduce 
our  ordinary  expenses  to  the  lowest  practicable 
I  limit.  These  measures  adopted,  we  may  safely 
leave  to  our  constituents  the  renewal  of  trade, 
the  restoration  of  confidence,  and  the  develop¬ 
ment  of  industry. 


